Oil Plummets as US-Iran Deal Overshadows Fed Hawkishness

The Federal Reserve kept interest rates steady at 3.50%-3.75% this week, but the messaging signaled a clear tightening bias that rattled Wall Street. Treasury yields surged to a 16-month high as markets digested the prospect of a potential rate hike by September. Despite the volatility, the broader market narrative shifted rapidly toward the 14-point agreement signed by President Donald Trump and Iranian President Masoud Pezeshkian.

This agreement mandates an immediate end to regional hostilities, the resumption of maritime traffic in the Strait of Hormuz, and the lifting of U.S. sanctions and asset freezes. The inclusion of a $300 billion reconstruction fund for Iran further underscored the scale of the deal. Energy markets reacted sharply to the news, pushing Brent crude down to approximately $78 per barrel as traders anticipated a surge in shipments through the critical waterway. Asian stock indexes reached record highs in response, and Wall Street futures pointed toward a recovery before the opening bell. Meanwhile, the Bank of England is expected to maintain its current 3.75% rate as it evaluates how these geopolitical developments will impact UK inflation, following a lower-than-expected 2.8% CPI print for May.