Markets are pricing in further de-escalation in the Iran war: Strategist

• Markets are pricing in further de-escalation and a permanent resolution to the Iran conflict, particularly concerning the Strait of Hormuz.
• This de-escalation is providing relief to oil and energy costs, as well as other critical inputs, leading to a significant drop in commodity prices.
• The reduced geopolitical risk may allow central banks to reconsider aggressive rate hikes, potentially leading to cuts if the situation remains prolonged, and could weaken the US dollar against APAC currencies.

Markets are currently pricing in a de-escalation of the Iran conflict following a two-week ceasefire agreement, leading to significant drops in oil prices and rallies in Asian equities. This shift is expected to ease pressure on central banks regarding aggressive rate hikes and could lead to a re-evaluation of supply chain resilience, with potential weakening of the US dollar against APAC currencies.