Is it “real peace” or “false hope”? An article overview: How investment banks view the temporary ceasefire between the US and Iran!

U.S. President Donald Trump said Tuesday that he has agreed to a two-week ceasefire deal with Iran. And less than 12 hours earlier, he had issued a “civilization-destroying” ultimatum to Tehran, demanding it reopen the Strait of Hormuz or face large-scale attacks targeting its civilian infrastructure.

Because the ceasefire is widely seen as clearing the way for lasting peace and restarting oil and natural gas exports from the Gulf region, oil prices plunged sharply in the early hours of Wednesday, bond markets rose, and Asia-Pacific equities and U.S. stock index futures also jumped significantly.

In response, many Wall Street strategists said that when Trump announced that the U.S. and Iran had reached a two-week temporary ceasefire agreement, it sent a welcome signal of easing tensions for global markets in the near term. But they also warned that whether the market rebound can last depends on when shipping through the Strait of Hormuz can return to normal. Elevated oil prices remain a major downside risk for the global economy, especially for Asian economies, many of which are highly dependent on Middle East crude oil imports. At the same time, it may be too early to start believing the “permanent peace” narrative.

Below are some investors’ and analysts’ latest comments and analyses of the situation:

Harris Financial Group: Trump has finally found a way down

Jamie Cox, managing partner of Harris Financial Group, said that markets had been predicting that Trump was looking for a way out of the Iran issue. “Today, he finally found it and seized the opportunity. The market has been rising slowly over the past week, largely because tougher rhetoric has been increasing, which is typically the prelude to a turn that is unavoidable before an agreement is reached.”

IG International: The rebound in Asian equities could be bigger than in Europe and the U.S.

Fabien Yip, a market analyst at IG International, said, “Of course, there is a lot of optimism right now, but because oil prices are still elevated, we have not yet returned to the levels seen at the end of February. It is crucial to watch Iran’s willingness to open the strait. Once tankers start transiting, the picture will become much clearer.”

“The rebound in Asian equities could be bigger than in Europe and the U.S., because Asia was hit the hardest after the outbreak of war. Tech and artificial intelligence stocks, which were previously hit by the most severe selloffs, stand to benefit the most. During the rebound, we may also see some profit-taking—some investors may use this opportunity to exit. Energy stocks, which benefited earlier from rising commodity prices, could also see profit-taking.”

Valverde Investment Partners: The market will focus on undervalued growth sectors

John Foo, founder of Valverde Investment Partners, pointed out that “yet another TACO trade is unfolding.” The ceasefire headline will trigger some risk-preference actions, because ASEAN and North Asia may get a breather on energy.

“Clearly, the market will focus on undervalued growth stocks and sectors—for example, technology stocks in North Asia, and stocks in Vietnam, Singapore, and Thailand.”

WILLIAM BUCK: Investors will still recognize that the ceasefire may not last

Besa Deda, chief economist at WILLIAM BUCK, said, “Given that this is the first ceasefire with real significance since hostilities began, the market may see some cautious optimism. However, investors will still be aware that the ceasefire may not last. Right now, we hope the ceasefire will be maintained, so as to limit the risk of the economy suffering deeper shocks. Of course, even if the ceasefire ultimately helps resolve the problem, the damage to refineries and infrastructure will still take time to repair and return to normal. But that is still far better than being affected for the long term.”

BARRENJOEY: There’s uncertainty about whether oil prices can fall to $75

Andrew Lilley, chief interest-rate strategist at BARRENJOEY, said that to return to the levels before the conflict broke out, we still have a long way to go. The current concern is how far the market’s uncertainty will allow oil prices to get back to $75.

“This delicate situation—namely that oil is indeed flowing, and no one is running short on supply, but prices are holding at a $90 equilibrium level—actually rules out the tail risk of central bank rate cuts. This scenario would keep yields persistently high, because our infrastructure has been damaged and oil prices will remain stuck at elevated levels over the next few months, which means we will face higher inflation.”

Westpac Bank: The market’s knee-jerk reaction is just the algorithm at work

Martin Whetton, head of financial market strategy at Westpac Bank, said, “This kind of thing (TACO) happens from time to time. Does it mean people will take on new risks? No, it does not. What would change the situation has to be a truly durable peace. People are not actually taking on risks. It’s simply the algorithm at work.”

ANNEX Wealth Management: The ceasefire is enough to keep people hopeful

Brian Jacobsen, chief economist at ANNEX Wealth Management, said, “President Trump said he agreed to a two-week ceasefire. That’s enough to keep people hopeful: not only will the entire (Iranian) civilization not be destroyed, but we may even see oil flow through the Strait of Hormuz again.”

“Of course, whether this is ‘kicking the ball back and forth,’ ‘moving the goalposts,’ ‘TACO Tuesday,’ or any other metaphor—ultimately it will just lead to tensions rising again and bombs falling again. Who knows? But for now, this is enough to trigger a positive market reaction.”

Lombard Odier: The market will see a de-stress-style rebound for the rest of the week

Homin Lee, Lombard Odier’s Singapore strategist, said, “If traffic through the Strait of Hormuz starts to improve significantly, the market will see a de-stress-style rebound for the rest of this week.”

“Traders will do everything they can to push the famous ‘TACO trade’ and further reduce the Hormuz premium in key asset categories. Beyond that, the reality of long-term geopolitical uncertainty in the Gulf region will limit how far they can push—especially if negotiation progress is not fast enough.”

K2 Asset Management: The key for the next week is replenishing energy supplies

George Boubouras, research director at K2 Asset Management, said that because the conflict could flare up again soon, replenishing energy supplies next week is key. The ceasefire lowers the probability of an economic recession, especially if more oil, natural gas, and fertilizer can flow in around next week. The market is always pragmatic rather than blindly optimistic, because it is pricing in the conflict itself, and from a one-year perspective, current valuations still look attractive.

Vantage Global Prime: It’s too early to start believing the ‘permanent peace’ story

Hebe Chen, senior market analyst at Vantage Global Prime, said that the plunge in oil prices after Trump announced the news gives markets a “much-needed window to breathe.”

“However, although this 11-day window has slightly repaired wavering confidence, it’s only a fragile restoration of sentiment—tactical breathing space, not a structural turning point. We are seeing funds rush out of war hedging instruments, but with the Strait of Hormuz still the world’s most expensive ‘hostage’ situation, it’s still too early to start believing the ‘permanent peace’ story.”

Mitsui Sumitomo Trust: Stocks that were sold off in the past month’s rout will be bought back

Hiroyuki Ueno, chief strategist at Mitsui Sumitomo Trust Asset Management, said, “This (temporary ceasefire) is a kind of relief for the market. The situation has calmed down for now. Iran has effectively returned to the negotiating table, which is a step forward. Now people feel that the high oil price won’t last for too long.”

“Stocks that were ‘sold off’ during the rout over the past month will be bought back again, driving a ‘respectable’ rebound in the short term. In Japan, it looks like tech and AI stocks are the best bets for buying. But nothing is guaranteed to go smoothly from here, and investors shouldn’t get carried away.”

Australia’s Commonwealth Bank: Still expecting the U.S. will ultimately need to escalate action to end the war

Carol Kong, a strategist at the Commonwealth Bank of Australia, said, “The FX market has shown a knee-jerk reaction, but crucially, there is still no plan for how the war will end. We still expect the U.S. will ultimately need to escalate its actions to end the war. Therefore, even though the dollar may weaken further in the short term, it will be difficult to sustain the decline.”

(Source: Caixin Finance)