Stocks rise on hopes for a 45-day Iran ceasefire

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Stocks rise on hopes for Iran ceasefire

Highlights

Markets are rising on talks of a 45-day ceasefire between the United States and Iran.
The Nikkei 225 rose 1.1%, while the Kospi gained 1.5%.
Brent is holding near $110.74, and elevated oil prices continue to weigh on rate expectations.
The S&P 500 ended last week up 3.4%, but the VIX remains near 24.

That optimism, however, remains fragile. Over the weekend, Donald Trump simultaneously spoke of “deep talks” with Tehran and threatened strikes on Iranian infrastructure if there were no progress on the Strait of Hormuz by Tuesday evening Eastern time. That mix of diplomatic signals and hardline rhetoric became the main source of volatility for equities, oil, and market sentiment.

A ceasefire as the driver of the rebound

According to Bloomberg, mediators from Pakistan, Egypt, and Turkey are discussing a two-stage framework in which the first step could be a 45-day ceasefire. Sources say the chances of a quick partial deal remain limited, but the mere fact that talks are taking place reduced fears of immediate escalation and supported demand for risk assets.

The reaction in Asian markets was noticeable: Japan Nikkei 225 rose 1.1%, while South Korea Kospi gained 1.5%. Markets in Australia, Hong Kong, and mainland China were closed for holidays, but the broader tone remained positive despite continuing tension around the Strait of Hormuz.

Oil, Trump threats, and a fragile balance

The rise in equities was accompanied by unstable oil trading. On Monday, Brent held near $110.74 a barrel, while WTI crude climbed to about $111.92. That is below the extreme intraday spikes seen in recent sessions, but still high enough to keep inflation concerns alive and prevent markets from confidently pricing in a softer Federal Reserve policy path.

The rebound in equities itself also looks more tactical than durable. The S&P 500 rose 3.4% over the shortened week, posting its best performance since late November, while the VIX volatility index hovered around 24 after five straight weeks of market declines. That suggests investors are still buying the dip, but they are doing so in an environment where a single headline from Washington or Tehran could quickly reverse sentiment.

What matters most for investors now

As long as there is a chance of a temporary pause in the conflict, investors are willing to move back into equities and cyclical sectors. But if Trump deadline passes without results and the Strait of Hormuz remains under threat, oil will once again become the main source of pressure on inflation, bonds, and the price of risk.

That is why the current rise in equities looks less like a bet on fundamental improvement and more like a bet that the worst-case scenario may still be avoided. For global markets, that means one simple thing: in the coming days, diplomacy in the Middle East is likely to matter more for prices than corporate earnings or routine macroeconomic data.

In addition, we wrote that Bitcoin rises above $69,000 on U.S.-Iran talks.

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