Risk assets rebound as US-Iran tensions ease expectations... oil prices plummet, interest rates decline

As concerns over U.S.-Iran military conflict ease, global financial markets quickly shift toward stability. The expectation of geopolitical risk relief boosts investor sentiment and impacts overall asset prices.

■ U.S.-Iran Conflict Easing Expectations…“Agreement Possible Within 5 Days”

According to data from the International Financial Center, President Trump delayed military strikes on Iranian energy facilities by five days and stated that dialogue between the two countries is making productive progress. He mentioned the imminent reopening of the Strait of Hormuz and is discussing key issues with Iranian senior officials, implying a potential agreement in the short term.

However, Iran denies negotiations themselves, showing conflicting positions. Regarding some media reports, Iran also refutes claims that they are “fake news to lower oil prices,” and confusion continues. Nevertheless, markets still focus on negotiation progress and react favorably toward risk assets.

■ Financial Market Reactions…Stock Prices Rise, Oil Prices Plummet, Interest Rates Fall

The expectation of geopolitical risk relief is immediately reflected in the markets.

S&P 500 Index (U.S.): +1.2%

Stoxx 600 Index (Europe): +0.6%

U.S. Dollar Index: -0.5%

U.S. 10-Year Treasury Yield: Down 4 basis points

WTI Oil Price: -10.4% (to $88 per barrel)

The sharp decline in oil prices reflects expectations of normalized crude supply, which in turn broadens expectations of easing inflation pressures, leading to lower interest rates. Risk-averse asset preferences weaken, the dollar declines, and the euro and yen rise respectively.

■ Federal Reserve Internal “Possible Rate Cut”…War Variables Are Key

Federal Reserve officials also hint at the possibility of easing policies. The Chicago Fed President stated that although inflation remains the main risk, if the Middle East conflict is resolved early, a rate cut could occur within the year. Fed governors also mentioned the need to cut rates to support the labor market.

In other words, future monetary policy directions are likely to depend heavily on geopolitical risks and energy price trends.

■ Europe, Japan, China…Ongoing Global Economic Uncertainty

In Europe, concerns about rising prices triggered by the Middle East have expanded, with consumer confidence index declining month-on-month to its lowest level in 2023. This reflects the simultaneous worries of high prices and economic slowdown.

Japan, in response to yen weakness, mentioned “using all means,” implying possible market intervention. Analysts believe that the near 1 USD to 160 JPY exchange rate has prompted policy responses.

China’s real estate market shows early signs of recovery during its long-term adjustment phase, with the possibility of stabilizing by 2027. However, its contribution to growth is expected to remain below past levels.

■ Structural Perspective…“U.S. Still Has Capacity to Absorb War Shocks”

Foreign media point out that despite facing war and tariff shocks, the U.S. economy remains relatively stable due to: ▲ AI competitiveness ▲ Energy independence ▲ The dollar’s status as the primary reserve currency. Analysts believe these structural advantages are key to maintaining the flow of global capital centered on the U.S.

On the other hand, warnings suggest that if the Iran conflict prolongs, changes in Gulf country capital flows could increase global interest rate pressures.

This market rebound demonstrates a typical macro path: “War relief expectations → Oil price decline → Stable interest rates → Preference for risk assets.” However, since the authenticity of negotiations remains uncertain, future market directions are likely to depend heavily on actual diplomatic progress.