The United States Dollar Index (DXY) fell to around 99.50 during Asian trading hours on Monday as safe-haven demand for the US Dollar faded following reports that the United States and Iran reached a deal to end their conflict. Both Washington and Tehran confirmed on Sunday that an agreement had been reached, set to take effect on Friday, with US President Donald Trump announcing the lifting of the US naval blockade on Iranian ports and the reopening of the Strait of Hormuz after the agreement is signed. European countries including the UK, France, Germany, and Italy expressed readiness to lift sanctions on Iran in response to steps on its nuclear program after the deal. Iran's National Security Council confirmed a ceasefire agreement, with final deal talks to begin after commitments under the memorandum of understanding are fulfilled. Iranian officials emphasized that the maritime blockade should end immediately and entirely [1].
The reopening of the Strait of Hormuz, a critical passage for nearly 20% of global energy supply, led to a sharp decline in oil prices, with WTI Oil dropping 4.8% to near $78.85, its lowest level in over three months. This development also triggered a rally in silver prices (XAG/USD), which surged 4% to near $70.80 in the Asian session. The recent months of elevated oil prices due to Middle East tensions had fueled global inflationary pressures and reduced the appeal of non-yielding assets like silver. The peace deal reversed this trend, boosting silver as oil prices fell [2].
Market expectations for US Federal Reserve policy shifted in response to the peace deal. The CME FedWatch tool showed that the probability of a Fed interest rate hike in December dropped to nearly 27%, down from 40% a week earlier [1]. Investors are now closely watching the upcoming Fed monetary policy announcement on Wednesday, where the central bank is expected to keep rates unchanged in a range between 3.50%-3.75% [2].
Technical analysis indicates that while XAG/USD trades significantly higher at around $70.80, it remains below the 20-day Exponential Moving Average (EMA) at $71.70, suggesting that rallies may be vulnerable unless the price closes above this level. The Relative Strength Index (RSI) has returned to the 40.00-60.00 zone, signaling early signs of a bullish reversal, but a move above 60.00 would provide a more reliable signal. A daily close above the 20-day EMA could open the door for a sustained recovery toward the May 25 high at $78.83 and the round-level $80.00, while failure to reclaim the EMA could see a retest of the March 23 low at $61.01 [2].
CONCLUSION
The US-Iran peace deal has had a significant market impact, weakening the US Dollar, sharply lowering oil prices, and boosting silver. Market participants are now focused on the Federal Reserve's upcoming policy decision, with expectations for further rate hikes diminishing. The reopening of the Strait of Hormuz and easing geopolitical tensions have shifted market sentiment toward risk assets and away from safe havens.