A draft agreement between the US and Iran, brokered by Pakistan and reported by Iranian state media citing Al Arabiya, is expected to be announced within hours, according to multiple sources [1][2][3][4]. The draft reportedly includes an immediate and comprehensive ceasefire across all fronts, a pledge to refrain from targeting infrastructure, freedom of navigation through the Persian Gulf and the Strait of Hormuz, lifting of US sanctions on Iran, and the start of negotiations on outstanding issues within seven days [1]. However, sources caution that previous deadlines have slipped, ceasefires have been broken, and mediators are still describing an agenda for talks rather than a signed agreement. Tehran and Washington remain apart on the length of any nuclear freeze, and Pakistan's army chief is reportedly heading to Tehran to address unresolved gaps [2][4].
The news triggered significant market reactions. Oil prices plunged sharply, with West Texas Intermediate (WTI) falling over 2% to below $97.50 after the draft news, and Brent crude pulling back from near $105 toward $100 [1][3][4]. Crude had earlier rallied on escalation headlines but reversed course as the prospect of reopening the Strait of Hormuz and easing supply fears erased the war premium that had kept prices elevated since late February [4]. The Dow Jones Industrial Average surged, erasing earlier losses and climbing above 50,000 to session highs near 50,350, as investors anticipated that lower oil prices would ease inflation and give the Federal Reserve more flexibility on interest rates [2].
Currency markets also responded. The US Dollar Index (DXY) retreated from six-week highs to around 99.13-99.16, while the Canadian Dollar struggled to benefit from the weaker USD due to its sensitivity to oil prices, with USD/CAD trading around 1.3775, up 0.20% on the day [1][3]. Gold (XAU/USD) remained virtually unchanged at $4,538, consolidating as ceasefire hopes offset hawkish Fed signals [1].
Economic data released Thursday included US Initial Jobless Claims falling to 209K, below the 210K forecast, and the S&P Global Manufacturing PMI rising to a four-year high of 55.3. However, the Philadelphia Fed manufacturing survey turned negative, and the US Composite PMI held steady at 51.7 [1][2][3]. Fed officials expressed mixed views: Richmond Fed President Thomas Barkin remained neutral, while Chicago Fed's Austan Goolsbee was hawkish on inflation [1].
Analysts and market participants remain cautious, noting that the market has previously 'bought the peace trade' only to be disappointed by missed deadlines and broken ceasefires. The current rally in equities and drop in oil prices are seen as the market front-running an announcement, not a response to a finalized deal. If the deal is delayed or diluted, the war premium could quickly return to oil prices [2][4]. Technical analysis suggests that a confirmed deal could push WTI toward $95-$96, with some forecasters flagging $80 by year-end, while gold remains in a consolidation phase unless buyers reclaim higher levels [1][4].
CONCLUSION
The prospect of a US-Iran deal has triggered a sharp selloff in oil, a surge in equities, and a pullback in the US Dollar, as markets anticipate easing inflation and supply fears. However, with no signed agreement yet and past negotiations faltering, market participants remain wary of a reversal if the deal fails to materialize. The situation remains fluid, and further confirmation is needed before the market fully prices in a lasting resolution.