Renewed hope

The US and Iran are actively negotiating and reportedly closing in on a one-page memorandum of understanding aimed at ending their recent two-month conflict but no final deal has been signed. The key points are no strangers to past demands on both ends: (1) Formally end hostilities and open the Strait of Hormuz. (2) Moratorium on nuclear enrichment (a major US demand). This could include handing over or limiting its stockpile of enriched uranium. In exchange, the US would lift certain sanctions and release billions in frozen Iranian funds. (3)The memo would set up a short window (30 days?) for broader negotiations on Iran’s nuclear program, sanctions relief, and regional security issues. The market response? Fresh All time highs in all three major indices, 30 year T-bond below 5%, Brent oil below $100/barrel, and precious metals with a strong move up. The deal is not signed, and this espisode may be short lived. But the market wants to believe this time the conflict will end. Will markets hold the new highs or will valuations begin to matter?

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