Iranian Ceasefire Deal Rewards Market Optimism During Missile Strikes

The United States attacked three nuclear facilities in Iran over the weekend, and the Persian Gulf nation retaliated Monday by firing missiles at a US airbase in Qatar.

At first glance, the events seemed like a recipe for oil prices to surge and stock markets to falter. Instead, the day proved to be relatively calm as officials signaled to investors that the prevailing mood was one of compromise despite the missile strikes. In the evening, there was even greater cause for relief: President Trump said Israel and Iran had agreed on a ceasefire.

Jockeying of the Diplomatic and Military Varieties

If the announcement was unexpected, the desire to de-escalate was not. Defense Secretary Pete Hegseth had said on Sunday that the US strikes on Iran were “not open-ended” and “not about regime change.” Vice President JD Vance put it another way in an interview with NBC News: “We’re not at war with Iran, we’re at war with Iran’s nuclear program.”

So, on Monday, when Iran responded to the US action with a courtesy heads-up before firing at an American airbase, markets read that as a signal that Tehran likewise preferred not to escalate. Iranian diplomats reached out to US officials through diplomatic channels, Reuters reported, to let them know they would fire on the base. They coordinated with Qatari officials also, The New York Times reported, in order to minimize casualties. Qatar was able to shoot down the missiles with its air defenses, and there were no injuries or deaths. President Trump even publicly thanked Iran for the advance notice. Markets remained surprisingly calm throughout, and that was before the ceasefire announcement in the evening:

• The West Texas Intermediate oil benchmark fell over 8% to $67.48 a barrel, its biggest drop in a day since early April and the first time it has traded below $70 since June 12, the day before Israel’s first strikes on Iran’s nuclear program. The S&P 500, Nasdaq and Dow Jones all rose just under 1% in a collective sigh of relief.
• After markets closed, Trump said on Truth Social that Israel and Iran, whose exchange of strikes in the past week had set the Middle East on edge, agreed to a ceasefire that would begin just hours later, at midnight ET. Escalation that would imperil both oil markets and investor confidence appears to have been averted — after Trump’s social media post, futures attached to the Dow and S&P 500 jumped 0.4% and futures for the tech-heavy Nasdaq rose 0.6%.

Relief Across the Pacific: Iranian state media reported that the country’s parliament voted over the weekend in favor of a measure to close the Strait of Hormuz, a crucial artery in global oil trade that carries 20% of the world’s daily supply, according to the US Energy Information Administration. China, which buys roughly 90% of all Iranian crude oil, according to data firm Kpler, would be among the worst-hit if such a move ever came to pass (Iran’s national security council makes the final call, and officials have bluffed about closing the strait before). Investors in China similarly remained level-headed on Monday, with the mainland Shanghai Stock Exchange rising 0.6% and the Hong Kong Stock Exchange up 1.6%.