The deal is in line with expectations. It will take several months for oil supply to normalize. It does not change the economic outlook but shifts the risk balance, reducing downside risk. The Fed is expected to turn neutral and stay on hold through this year and next. Core inflation remains sticky, and financial conditions are accommodative. China's domestic demand is weak, while Japan's underlying inflation is building, supporting BOJ hikes.

The interim deal is a 60-day MOU to reopen the Strait of Hormuz and halt military ops. Key details on nuclear enrichment, sanctions relief, and frozen assets are deferred. Israel's stance is a major uncertainty; Iran conditions the deal on a Lebanon ceasefire. The U.S. and Iran already disagree on tolls and control of the strait, creating implementation risk.

The peace deal is positive and supportive for the Japanese economy. The BOJ is expected to hike, as underlying inflation is building and people's inflation expectations are changing. The neutral rate is around 1-1.5%. The deputy governor's press conference will be key for messaging on how the BOJ evaluates current expectations.

The peace deal is crushing oil upside bets and broadly supports the risk complex. Asian futures are getting a big lift, especially in oil-importing EMs like Indonesia, Philippines, and India. The FOMC is a non-event with nothing priced in, but the BOJ hike is well-choreographed. The pace of the Strait reopening will determine how quickly EM assets can bounce.

The Trump administration got the least bad option. The original rationale for the war was not attainable. The deal is an MOU, which is unusual for ending wars. The key going forward is for the U.S. to have the expertise to get a good agreement. China has benefited significantly as a customer for Iran's oil. The relationship with Israel is under strain, with Trump calling Netanyahu 'very difficult'.