Fars News reports that Iran's armed forces announced end of military operations against Israel, but warned of harsher attacks if Israel resumes attacks on Lebanon.
The signals of an imminent end were already up in the air with Trump's posts on Truth Social, and now we've got the confirmation. This is leading to a relief rally in risk assets and a drop in oil prices as the worries of a broader escalation ease.
For context, Trump this morning posted on Truth Social: "Israel and Iran must immediately stop shooting". This was then followed by another post where Trump said that Israel and Iran were looking for an immediate ceasefire.
As mentioned previously, the core problem remains: the Strait of Hormuz will remain closed and keep oil prices persistently elevated. Moreover, this latest escalation is almost certainly going to extend US-Iran stalemate.
It's also worth reminding that the catalyst for the selloff in markets on Friday was the very strong NFP number as it served as a wake-up call for the hawkish Fed risk. It wasn't related to Middle East. The focus has shifted to the Fed now.
Monetary tightening into a negative supply shock is an ugly recipe for growth and that's going to weigh on markets if the Fed indeed tightens. If Trump doesn't end this soon, the Fed is going to do it for him and it won't be nice.
