Partner, Portfolio Manager
Tuesday night, President Donald Trump announced a two-week ceasefire agreement with Iran, opening the door for more substantive negotiations while signaling a near-term cooldown in what had become a rapidly intensifying geopolitical conflict.
The announcement followed escalating comments from the administration, with Trump previously threatening to destroy Iran’s “whole civilization” if a deal wasn’t struck by Tuesday night. His most recent threats were aimed at Iran’s power grid, bridges, oil production facilities, and water infrastructure.
How Is The Temporary Ceasefire Impacting Markets?
Wednesday morning, stocks rallied on the announcement while oil prices plummeted. The Dow finished the day up 1,325 points, or 2.8%, its largest one-day gain since last April, while the S&P 500 and Nasdaq were up well over 2%, representing their sixth straight day of gains. US crude futures finished Wednesday down 16% to $94.41, its largest one-day drop since 2020.The response in fixed-income markets was more measured. The benchmark 10-year US Treasury yield edged slightly lower to 4.27% as bond investors looked for indications that any sustained de-escalation could potentially help ease inflationary pressures and create a clearer path for the Federal Reserve to begin cutting rates in 2026.
Notably, fed fund futures probabilities for upcoming rate cuts shifted meaningfully, with expectations for a 25-basis-point cut in December 2026 rising to approximately 30%, up from less than 14% just a day earlier.
What’s Next For Ceasefire Negotiations?
A US delegation, led by Vice President JD Vance, is expected to engage in further ceasefire negotiations this weekend in Islamabad, with the goal of establishing a more permanent agreement. Key issues on the table include Iran’s nuclear program, current sanctions against Iranian oil exports, the control and flow of the Strait of Hormuz, and Iran’s current possession of enriched uranium.The initial market reaction was clear: risk assets were relieved by the prospect of an off-ramp for conflict, posting a meaningful rally mid-week.
Questions remain, however, after reports of disagreements emerged shortly after the announcement.
Disputes over the reopening and control of the Strait of Hormuz and Israel’s continued attacks on Lebanon—developments Iran has characterized as violations of the ceasefire— jeopardize the fragile agreement.
Early Thursday morning, oil traded higher to $100 on the news. Vice President Vance has acknowledged the current situation as a “fragile truce.”
What Does The Ceasefire Mean For Investors?
We caution our clients that while a ceasefire potentially reduces immediate downside risk, it does not eliminate the potential for more volatility throughout the spring and summer.For investors, the ceasefire should be viewed as a temporary de-escalation rather than a definitive turning point. Markets are likely to remain sensitive to headline risk, especially given the stakes of this upcoming weekend’s negotiations.
There is the high likelihood that negotiations extend into the upcoming days and weeks ahead. Markets will most likely stay highly reactionary to these developments.
From our perspective, the fragility of the current environment underscores the importance of maintaining a disciplined, long-term investment approach rather than reacting to headline-by-headline announcements that can easily knock investors off-balance.
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