June 26, 2025
Global financial markets entered rally mode today after former U.S. President Donald Trump announced a tentative ceasefire agreement between Israel and Iran, effectively ending nearly two weeks of regional conflict that had rattled investors and pushed oil prices sharply higher. The truce, while fragile and lacking full international verification, was enough to ignite risk-on sentiment across global exchanges. The MSCI World Index jumped to a record high, while U.S. benchmarks also soared. The S&P 500 gained over 1.3%, approaching its own all-time high, and the Nasdaq surged even further as investors rotated back into growth and tech sectors (Reuters, 2025c).
The biggest immediate reaction came in the oil market. Brent crude futures dropped more than 6%, closing near $67.14 per barrel, well below the $75–$80 range that had dominated during the height of the conflict. With the Strait of Hormuz no longer seen as an imminent flashpoint, traders unwound positions built on supply fears. Goldman Sachs noted in a client update that the risk premium embedded in oil prices had been “partially erased,” but warned that prices could still spike if the ceasefire collapsed or was violated, particularly given Iran’s existing tensions with the West over its uranium program (Reuters, 2025a).
Currency and bond markets also responded with optimism. The U.S. dollar weakened, giving room for the euro to rally toward $1.16 and supporting gains in emerging market currencies that had suffered amid capital outflows earlier this month. Meanwhile, U.S. Treasury yields edged lower, with the two-year note falling to 3.80% and the 10-year holding steady at 4.29%, as traders pared back expectations of further monetary tightening. Investors appeared to be positioning for a more accommodative Fed in the medium term, though policy clarity remains elusive as Federal Reserve Chair Jerome Powell testifies before Congress this week (Reuters, 2025d).
Despite the upbeat tone in markets, warning signals about the underlying economic outlook are getting louder. JPMorgan released a midyear outlook indicating rising stagflation risks for the U.S. economy, with GDP growth expected to slow to just 1.3% and inflation remaining elevated due to tariff impacts. The bank assigned a 40% chance to a mild recession in the second half of the year, citing policy uncertainty and deteriorating business investment as key headwinds (Reuters, 2025b). Many market participants remain uneasy about the long-term effects of Washington’s protectionist trade stance and the possibility of retaliation from China and the European Union.
The ceasefire has also done little to ease pressure on global supply chains, particularly in the semiconductor and EV sectors, where tariffs and geopolitical tensions continue to weigh on sourcing strategies. Meanwhile, upcoming U.S. economic data, such as new home sales, jobless claims, and June’s consumer spending figures, will be watched closely to confirm whether the U.S. economy is still cooling or nearing a policy-driven inflection point.
In short, while today’s market rally reflects short-term relief, the underlying risks, geopolitical instability, inflation stickiness, trade fragmentation, and monetary uncertainty—remain very much alive. For investors and businesses alike, the message is clear: volatility is here to stay, and this ceasefire is not a cure-all.
References:
- Reuters. (2025, June 24). Wall Street ends sharply higher, S&P 500 nears record as Middle East tensions cool. https://www.reuters.com/business/us-stock-futures-rise-after-trump-announces-israel-iran-ceasefire-2025-06-24/
- Reuters. (2025, June 24). Goldman Sachs warns of oil price surge on Strait of Hormuz risks. https://www.reuters.com/business/energy/goldman-sachs-warns-rising-risks-energy-supply-sees-potential-surge-oil-prices-2025-06-23/
- Reuters. (2025, June 25). JPMorgan sees tariff-induced US ‘stagflationary’ slowdown in 2025. https://www.reuters.com/business/jpmorgan-sees-tariff-induced-us-stagflationary-slowdown-2025-2025-06-25/
Reuters. (2025, June 24). Asia stocks edge up, dollar droops as ceasefire buoys confidence. https://www.tbsnews.net/world/global-economy/asia-stocks-edge-dollar-droops-ceasefire-buoys-confidence-1173501
