Skip NavigationMarketsBusinessInvestingTechPoliticsVideoWatchlistInvesting Club
PRO
LivestreamMenuTraders are cheering President Donald Trump’s signing of an Iran deal memorandum , but some on Wall Street remain cautious about if or when the war will end. Trump announced Sunday that an agreement had been reached to end the monthslong conflict between the U.S. and Iran. A memorandum of understanding has been signed electronically and is expected to be formally signed on Friday in Switzerland. All three major U.S. stock indexes rallied on Monday, pushing the Dow Jones Industrial Average to a fresh record. U.S. crude prices dropped below $80 per barrel for the first time since early March after Trump said the Strait of Hormuz maritime passage would open and the U.S. would end the naval blockade of Iran. But several strategists and analysts warned clients that the latest development may prove a temporary bandage rather than a long-term solution. Some expect delays and conflict in the next round of negotiations, while others questioned if the deal benefited the U.S. “We will believe all of this when we see it,” said Jan Stuart, global energy strategist at Piper Sandler, in a Monday note to clients. “Obviously, both sides are contradicting themselves and none of the details mesh.” Andy Laperriere, a colleague at Piper Sandler, said the next 60-day negotiation round will likely need at least one extension. The talks could collapse altogether if Iran doesn’t make concessions to the U.S. on nuclear energy, he said. Laperriere, the investment bank’s head of U.S. policy research, said he doesn’t expect Iran will agree to U.S. demands for a toll-free Strait of Hormuz. Similarly, Height Capital Markets’ Benjamin Salisbury stressed the interim nature of the memorandum of understanding. “Our bias is that this MOU will mirror similar interim deals that produced a sustained calming effect but didn’t immediately result in a binding, durable resolution,” said Salisbury, the head of research at Height Capital. Hormuz oil traffic In the meantime, investors will be watching to see if traffic in the Strait of Hormuz ramps up, according to Sarah Bianchi, chief strategist for international political affairs and public policy at Evercore ISI. About one-fifth of the world’s crude oil transited through the narrow passageway before the war, but traffic nearly shut down since the conflict began. But Trump claimed last week that the U.S. has secretly moved more than 100 million barrels of oil through the strait. Much more time is likely required “to return to anything close to normal levels given potential de-mining efforts and the need to restore confidence in the broader security environment,” Bianchi at Evercore ISI wrote to clients. “Even in the best-case scenario, global energy markets will take time to normalize and will continue to grapple with the medium-term implications of Iran’s demonstrated ability to disrupt traffic through the Strait.” The average price for Brent crude oil, the global benchmark, is likely to remain at $85 a barrel in the third quarter, meaning through the end of September, UBS analyst Henri Patricot predicted. Prices should fall as oil begins flowing, he said, but a rebound in demand should put a floor on any potential downside. In fact, some analysts even questioned if the deal will be advantageous to the U.S. at all, given that the decision to start the war reignited inflation and resulted in American casualties . President Trump may feel the need to move forward with an agreement — even if less than ideal — with the U.S. midterm elections looming in November, said Jacob Funk Kirkegaard, head of European research at 22V Research. “In the end, the economic and political necessity of bringing his election year war of choice to a close appears to have forced President Trump’s hand in getting to this objectively ‘bad deal,’” Kirkegaard wrote in a report to clients. “The United States and by extension Israel will now have lost credible military deterrence of Iran going forward.”Read More
About The Author
