U.S. President Donald Trump and Iran's deputy foreign minister reached an initial peace deal on Monday to end conflict and reopen the Strait of Hormuz [1, 2].

The agreement is critical because the Strait of Hormuz serves as a primary artery for global oil transit. Reopening the waterway is expected to stabilize energy markets, lift sanctions, and improve international trade and logistics [1, 2].

Market reactions were immediate following the news. Oil prices fell four percent after the deal announcement [1]. This follows a period of volatility in late May when oil prices dropped five percent while investors awaited updates on the negotiations [2]. Some reports indicate that oil prices have slipped to their lowest levels since March [2].

"We are making progress on the agreement and expect the Strait of Hormuz to reopen soon," Trump said [3].

The diplomatic breakthrough follows ongoing discussions that spanned through late May. While the initial deal focuses on ending hostilities and restoring traffic, other commodities have also reacted to the news. Base metals declined amid mixed signals regarding the progress of the U.S.-Iran deal [3].

Despite the announcement, some reports previously indicated that negotiations faced uncertainty and lacked a final agreement as of early June [1]. However, the current deal represents a tentative step toward normalizing the region's shipping lanes and reducing the risk of energy supply disruptions.

“"We are making progress on the agreement and expect the Strait of Hormuz to reopen soon," Donald Trump said.”

The reopening of the Strait of Hormuz removes a significant geopolitical risk premium from global energy prices. By reducing the likelihood of shipping disruptions in one of the world's most sensitive chokepoints, the deal may lower inflation for energy-dependent economies and stabilize global supply chains, though the long-term durability of the peace depends on the full lifting of sanctions.