KEY POINTS
- S&P 500 futures jumped 1.3% and Nasdaq futures surged 1.9% Monday morning after the US and Iran confirmed a deal to end nearly four months of war and reopen the Strait of Hormuz.
- WTI crude crashed 5.6% to $80.14 per barrel as traders unwound the geopolitical risk premium that has defined energy markets since February.
- The FOMC meets Tuesday and Wednesday, and the oil collapse reshuffles the inflation calculus heading into Warsh's first rate decision as chair.
The biggest geopolitical risk trade of 2026 unwound in a matter of hours Sunday night. Futures on the S&P 500 surged 1.3% and Nasdaq 100 contracts jumped 1.9% after President Trump declared the US-Iran deal "now complete" and authorized the removal of the Navy blockade around the Strait of Hormuz. Dow futures climbed 417 points to 52,022 as the news crossed just before Asian markets opened.
The 14-point memorandum of understanding, confirmed by NBC News, declares "the immediate and permanent termination of military operations on all fronts." Oil and certain financial sanctions on Iran will be lifted, and the Strait of Hormuz — which carries roughly 20% of global petroleum exports and has been under de facto Iranian blockade since late February — will reopen to all shipping by Friday. A formal signing ceremony is scheduled for June 19 in Switzerland.
Oil's Sharpest Drop Since the April Truce
Crude oil bore the brunt of the repositioning. WTI futures for July delivery dropped 5.6% to $80.14 per barrel, their steepest single-session decline since the twelve-day ceasefire collapsed in April. Brent fell 4% to $83.77. Before the deal, Brent had surged from $70 pre-war to a March peak above $97. The three-month blockade of Hormuz eliminated a fifth of global petroleum exports and pushed gasoline prices to their highest levels since 2022, according to Al Jazeera.
Energy stocks face the sharpest repricing. The sector gained 37% in Q1 alone on the supply disruption. Traders now need to reassess which of those gains were structural and which were pure geopolitical premium. Secretary of Energy Chris Wright cautioned that it could take "many months" for global energy supplies to normalize even with Hormuz open, which sets up a complex trade for the sector through summer.
Bond Market Holds Steady, Gold Rallies
Treasury yields barely moved on the news, with the 10-year hovering at 4.42%, suggesting the bond market sees the deal as disinflationary on energy but not enough to change the Fed's calculus this week. Gold, meanwhile, rallied 2.8% to $4,339 per ounce — its third consecutive session of gains — as investors hedged against execution risk on the 60-day negotiation window that follows the framework.
The deal lands at an unusually loaded moment for markets. The FOMC opens its two-day meeting Tuesday with Kevin Warsh chairing for the first time. No rate change is expected, but CNBC reported that the peace agreement may ease the Fed's hand on hawkish language, given that energy prices have been the single largest driver of the inflation overshoot in 2026. May retail sales and pending home sales data also arrive Wednesday alongside the rate decision.
This is a holiday-shortened week — NYSE and Nasdaq close Friday for Juneteenth — which compresses five days of catalysts into four. Traders should watch the $80 level on WTI as the near-term floor. A break below it would signal that the market believes the deal holds and supply normalizes quickly. If oil bounces back above $85, the market is telling you it doesn't trust the framework. That distinction matters more than anything the Fed says Wednesday.
