First Light News: US-Iran Ceasefire Sparks Broad Relief Rally

Following weeks of tension and outright threats – including President Trump’s ‘a whole civilisation will die tonight’ warning – the US and Iran agreed to a two-week double-sided ceasefire, largely mediated by Pakistan. As per Trump’s Truth Social post below, the two-week truce temporarily halts all military campaigns in exchange for Iran reopening the Strait of Hormuz. This provides a much-needed reprieve from a conflict that has threatened global energy security.

You will recall that the Strait – a vital waterway responsible for about a fifth of global seaborne oil – has been all but closed since early March. While the ceasefire is positive news and underpins a risk-on market environment, reaching a temporary ceasefire is one thing, but allowing vessels free passage through the Strait is another. Only time will tell.

Cross-asset Relief Rally in Play

Oil prices are sharply lower today, with Brent and WTI spot trading comfortably south of US$100/barrel, down by 10% and 14%, respectively. The magnitude of these moves shows how eager the markets were for this shift, and understandably so. I am closely watching support between US$85.88 and US$89.09 on Brent as the next downside target.

Meanwhile, spot gold rallied on the back of the ceasefire news, rising 2.7% so far today. This was bolstered by USD weakness – the USD index is now down 0.8% – and by easing inflationary pressures, which could fuel a Fed rate cut this year.

The FX session shows USD softness across the board, as noted above, with the EUR, GBP, AUD, CAD, and CHF all higher in early European trading. The USD has served as a strong haven play during the US-Iran conflict, and the crowded bullish CoT positioning may fuel the move lower in the greenback today as traders unwind those long positions.

In the equities space, Asia Pac stocks rallied strongly overnight. Japan’s Nikkei 225 caught a sizeable bid, up 5.5%, along with South Korea’s KOSPI adding 7%. European market averages also opened with a robust bid. For fixed income, global yields have fallen across the curve, largely due to a reduction in the inflation premium. It is important to remember that bond yields are, in part, a bet on future inflation, and with oil taking a sizeable hit, this lessens the heat on prices.

Is the Market Overswinging Here?

I am sure many desks will be wondering whether the market has overstretched itself this morning. For the market’s assumptions to hold and justify the price moves seen, the ceasefire will clearly need to hold, missiles must stop flying, credible progress in talks between the US and Iran is also essential, and shipments have to begin passing through the Strait.

Anything that goes wrong here could significantly reverse the market moves. For now, I think this is simply a case of not getting ahead of ourselves.

RBNZ Stands Pat; Fed Minutes Eyed

On the macro front, the RBNZ offered little overnight and held the official cash rate steady at 2.25%. This follows 325 bps of easing since 2024, with the NZD modestly rising following the announcement. Markets are currently pricing in 60 bps of tightening by year-end, up from 43 bps a month ago.

The rate announcement was accompanied by a cautionary tone regarding inflation amid the Middle East conflict, with the central bank stating that price pressures are likely to increase and economic growth may weaken in the short term. The minutes highlighted that considerable second-round inflationary effects could trigger timely rate hikes.

While market sentiment remains influenced by geopolitical events, the minutes from the March Fed meeting will also be released at 6:00 pm GMT today. Market participants will be watching the Fed’s assessment of rising inflation in the March minutes, signs of delays in future policy easing, and the impact of geopolitical risks in the Middle East. If Fed officials describe the energy shock as temporary, this could lead to further downside for the USD.

Written by FP Markets Chief Market Analyst Aaron Hill