President Trump signed an interim memorandum of understanding with Iran during a candlelit dinner at the Palace of Versailles on Thursday, following the conclusion of the G7 summit in France, in a move markets read as meaningfully de-risking the months-long Middle East conflict. "Just signed it," Trump told reporters as he emerged from the palace, with French President Emmanuel Macron and other dinner guests applauding the moment, according to video shared by a White House aide.
The agreement, brokered with Pakistani involvement, calls for Iran to immediately reopen the Strait of Hormuz, the narrow waterway through which nearly a fifth of the world's seaborne crude oil normally passes, while the United States lifts its naval blockade on Iranian ports and grants sanctions waivers allowing Tehran to resume oil exports. In exchange, Iran has agreed to dilute its stockpile of highly enriched uranium, with a 60-day window set for negotiating a more permanent settlement. Trump warned that the U.S. could resume military operations if Iran fails to comply, telling reporters at the G7 press conference, "if they are not behaving, they will be hit again."
Energy markets reacted immediately. Brent crude fell more than 2% to trade below $78 a barrel, while West Texas Intermediate dropped to roughly $74.69, extending a decline that has now erased much of the war premium built into oil prices since the conflict began earlier this year. U.S. equity futures jumped in sympathy, with S&P 500 contracts up about 0.7% and Nasdaq 100 futures rallying 1.1% in early trading, clawing back a chunk of Wednesday's selloff that followed the Federal Reserve's hawkish policy hold.
The timing is notable because it follows directly on the heels of new Fed Chair Kevin Warsh's first FOMC meeting, which left the Wednesday session under pressure after policymakers signaled openness to a rate hike later this year. Thursday's geopolitical relief rally is, in effect, competing with a more cautious monetary backdrop, and strategists say the durability of the equity bounce will depend heavily on whether the ceasefire holds through its 60-day negotiating window.
Skepticism about a swift return to normal oil-market conditions persists even as prices fall. Shipping analysts note that insurers, vessel owners, and crews will need time to be convinced that transit through the strait is safe before tanker traffic resumes at scale, and some risk consultancies have estimated it could take several weeks for shipments to climb back to even half of pre-conflict levels. Brent futures for delivery through early 2027 have remained anchored near $80 a barrel even after Thursday's signing, suggesting traders are pricing in a gradual, not immediate, normalization.
The deal also carries political complications. Trump's own comments suggested he views the truce as provisional rather than permanent, despite language in the memorandum describing an "immediate and permanent termination of military operations." U.S. Defense Secretary Pete Hegseth separately told NATO allies Thursday that the Pentagon will review its European force posture within six months, adding a layer of uncertainty to how durable the broader regional realignment will prove to be.
For investors, the immediate read-through is straightforward: lower energy costs ease a key inflation input just as the Fed has signaled it may need to stay restrictive for longer, while easing geopolitical risk premia broadly support risk assets. Energy-sensitive sectors, airlines, and industrials are likely to see the most direct price impact in the sessions ahead, even as the underlying diplomatic situation remains fluid.