A US-Iran deal is good only if it delivers on what it says it would
At this point, it feels like the US and Iran just want to put an end to the conflict. And after three-and-a-half months, it seems that both sides have had enough. That is good news for markets, to a certain extent at least.
Couple that with what arguably was a very successful debut for SpaceX on Friday, the market mood to start the new week is looking good.
There was much nervousness and anxiety on how SpaceX shares would've fared at the end of last week. The stock was indicated early to open at $175 before officially starting trade at $150. But after, the shares rose to a high of $176 before closing at $161 - still significantly stronger than the IPO price of $135.
As for the US-Iran deal, the headlines are encouraging but only if they do live up to the billing in the coming weeks/months.
Iran will see oil sanctions lifted and get $12 billion in assets unfrozen before the next round of negotiations begin. Yes, there will still be talks on nuclear arrangements after this over the next 60 days.
And that will be in exchange for a ceasefire in all parts of the region, including Lebanon, and also for the US to lift its naval blockade. All this just so the Strait of Hormuz will be "reopened" over the next 30 days with it still set to be managed by Iran after.
Trump said that he would make sure to make the waterway "permanently toll-free". However, let's be reminded here that the strait has always been toll-free before this conflict began. So really, what was the whole point of this war again?
In any case, the fact that both sides seem to be wanting to get off the Ferris wheel and exit the circus is still a good thing. Even if the Strait of Hormuz were to see a managed reopening, it will still be better than what it is now.
The only question though is, can this MOU agreement hold for the next 60 days and stay that way or progress further?
The Strait of Hormuz reopening will be the most important detail to watch for broader markets. However, you can't just flip a switch and expect traffic to get back anything to where they were before the war started.
The waterway will only open when it is open, that is when commercial vessels are able to sail in and out with maritime insurance also agreeing to take up the risks of securing these ships. Otherwise, this will be a slow trickle at best as things could still go wrong over the next 60 days.
Here is what is likely to happen (we're at Stage 3 now):
The reality is that if commercial vessels are not able to secure maritime insurance still, traffic is not going to return to pre-war levels any time soon. And if this MOU could come undone at any time in the next 60 days, it'll be hard to tough to manage the situation.
Israel is already threatening to unravel things here to start with. And then you have Iran also claiming that it will need up to 30 days at least to "clear out mines" along the waterway.
Then, you also have the fact that the reopening will still be managed/controlled by Iran. It won't be a case of the strait being free for all to transit accordingly as they need to.
And in this whole game of negotiating with the US, it is reasonable to expect that Iran's game plan is to keep delaying things. That is so they don't have to deliver on any firm commitments on nuclear arrangements and uranium disposal.
That was their predisposition before the war began and reflected their stance towards the 2015 JCPOA. And given the circumstances, I would expect no less from Iran once again.
If that is the end goal here, then there is still much to be wary about. That especially since the Strait of Hormuz might not see traffic return back pre-war levels even if likely to see some pick up in activity.
It's not as easy as making an announcement or declaration that the waterway will be open. The details are more nuanced and will require more scrutiny in the coming weeks/months.
As such, shipping data will be the best tool to determine how much of this deal is a theatrical performance and how much of it is actually a positive reality for the world and also for markets.
This article was written by Justin Low at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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