FX Daily: Global currencies recover after nearing crisis

Market Reaction to Easing Tensions in Iran

Global risk assets are climbing as tensions in Iran begin to subside. The most notable development overnight is Iran’s decision to permit secure passage for vessels through the Strait of Hormuz during the current ceasefire.

Attention will now turn to monitoring shipping activity in this crucial waterway. A marked increase in traffic could put additional downward pressure on oil prices and potentially reverse the stagflationary investment patterns that have shaped markets in recent weeks. These patterns have featured sharply flattening yield curves, weaker equities, and a strengthening US dollar.

However, a full return to previous market conditions is unlikely in the immediate term.