Morning Brief: US and Iran Strike Framework Pact to Reopen Strait of Hormuz, Nasdaq Surges Over 3%, WTI Crude Drops Below $81 Key Snapshot

Key Snapshot

🕊️ The US and Iran have sealed a framework deal to reopen shipping lanes in the Strait of Hormuz. The Nasdaq jumped 3%, while Western Digital rocketed 16%.

🛢️ WTI crude settled down 4.87% at $80.75 a barrel; Brent crude shed 4.76% to $83.17 a barrel.

📈 The S&P 500 rose 1.65%, the Dow Jones gained 0.92% to hit an all-time closing high of 51,671 points, and the Nasdaq rallied 3.07%.

🏛️ A Bank of Japan rate hike on Tuesday is all but locked in, paving the way for a return to 1% benchmark rates. The G7 Summit has officially kicked off in France.

I. Market Outlook

Core Events

Washington and Tehran hammered out a framework agreement to resume vessel transit through the Strait of Hormuz. The US Vice President stated the waterway would stay permanently open with toll-free passage, whereas Iran plans to levy shipping service fees. Nuclear negotiations and sanctions relief are set to kick off within 60 days.

Market Reaction

Risk assets rallied broadly on easing geopolitical tensions. The Nasdaq surged 3.07% and the Dow notched a fresh record high; Western Digital spiked 16% to an all-time peak. Crude prices crashed, with WTI sliding 4.87% under $81 as the entire geopolitical risk premium was wiped off pricing.

Exclusive Insight

With crude under $81, prices now sit below pre-war levels. Markets are no longer just stripping out conflict risk premiums — they’re now pricing in a looming crude supply surplus. The Nasdaq’s 3% jump signals a sharp rotation out of energy and defensive sectors into high-beta growth tech names.

II. Overnight Market Performance

Summary

The US-Iran Hormuz framework pact fueled a broad risk-on rally: the Nasdaq gained more than 3%, while crude oil slumped nearly 5%.

— US Equities: S&P 500 +1.65% to 7,554.29; Dow Jones +0.92% to 51,671.03; Nasdaq +3.07% to 26,683.94.

💡 The Nasdaq posted a blistering 3% gain and the Dow hit a brand-new all-time high. Capital rotated away from energy and defensive stocks into high-vol tech plays. Western Digital’s 16% surge led the S&P 500 and lifted sentiment across the memory chip space.

— European Equities: The STOXX Europe 600 closed 0.19% higher at 634.44.

💡 European equities edged up but lagged US gains by a wide margin. The region priced in geopolitical relief slowly, with sentiment capped by ECB policymaker Nagel’s warning that inflation concerns haven’t faded.

— Fixed Income: The US 10-year Treasury yield fell 1.19 bps to 4.4671%; the 2-year yield slipped 2.51 bps to 4.06%.

💡 Treasury yields edged lower as collapsing crude cooled inflation fears. Investors held off large bets ahead of the BOJ rate decision and fresh updates from the G7 Summit.

— Commodities: July WTI crude -4.87% to $80.75/bbl; August Brent crude -4.76% to $83.17/bbl. Spot gold +2.16% to $4,310.36/oz, spot silver +2.88% to $69.9657/oz.

💡 Crude broke below $81 and now trades cheaper than pre-conflict levels. Every trace of the geopolitical risk premium has been priced out, and markets are now baking in surplus supply expectations. Gold rebounded to $4,310 as a softer dollar and cheaper oil reignited Fed rate-cut bets.

— Forex: The US Dollar Index dipped 0.20% to 99.60. EUR/USD rose 0.19% to 1.1590, USD/JPY eased 0.07% to 160.32.

💡 The dollar faced dual headwinds from the US-Iran détente and falling crude prices. The yen hovered around 160.3, with traders waiting on the BOJ’s Tuesday policy verdict.

— Precious Metals & Crypto: Spot gold breached $4,300 at $4,308.93, spot silver hit $70.003.

💡 Gold staged a breakout above $4,300 driven by a weaker dollar and sliding crude, with silver tracking bullion’s rally in tandem.

III. Macro News

🕊️ The US and Iran finalised a framework to reopen the Strait of Hormuz: the US promises permanent toll-free transit, while Iran intends to charge vessel fees. Nuclear talks and sanctions relief will launch within 60 days. G7 leaders doubt a rapid full reopening. An explosion was reported in southern Iran after US market hours.

Insight: While this is a historic framework agreement, the stark divide over transit fees proves core operational details remain unresolved. Post-market blasts in Iran serve as a critical reminder that a signed framework does not equal lasting peace, and crude’s steep drop may reflect overoptimistic market pricing.

🇯🇵 A Bank of Japan 1% rate hike on Tuesday is effectively guaranteed.

Insight: This hike is a watershed moment, as the world’s last major zero-rate central bank exits ultra-loose monetary policy. The move offers near-term support for the yen but creates valuation pressure on Japanese equities. Markets are pricing an additional hike as soon as October, signaling the tightening cycle is only just getting started.

🇪🇺 ECB President Lagarde welcomed the Hormuz deal, but Governing Council member Nagel warned oil supply will take months to normalize even if the strait reopens.

Insight: Deep internal divisions persist within the ECB over inflation outlooks. Lagarde focuses on the positive diplomatic breakthrough, while Nagel prioritizes physical crude supply recovery. A multi-month recovery timeline rules out an immediate plunge in oil back to pre-conflict lows.

🇫🇷 The G7 Summit has opened in France. Trump threatened 100% tariffs on French wine amid brewing trade tensions, with Macron vowing he will not back down.

Insight: US-EU trade friction has taken center stage at the G7 gathering. The standoff over digital services taxes and wine tariffs marks the first major bilateral trade battle of Trump’s second term, putting the bloc’s collective unity to the test.

IV. Corporate News

🚀 SpaceX closed 20% higher, adding $412 billion to its market cap, with total IPO proceeds climbing to $857 billion.

—— SpaceX notched another 20% gain on its second trading day, bringing its two-session cumulative jump above 40%. Markets are continuously pricing in long-term option value tied to its Mars colonization roadmap. The $857 billion raised stands as the largest IPO haul in global capital market history.

💰 Nvidia priced its first corporate bond offering in five years, raising $250 billion with over three times oversubscription.

—— Issuing debt while its share price sits at elevated levels is shrewd capital allocation from Nvidia. Low-cost debt funds business expansion without diluting existing shareholders. Triple oversubscription signals overwhelming institutional confidence in Nvidia’s credit profile.

❌ OpenAI’s Sora shut down just six months post-launch, alongside a wave of smaller AI app closures. Most lack proprietary core technology and sustainable competitive moats.

—— A brutal industry shakeout is underway across the AI space. Sora’s shutdown acts as a watershed event: pure consumer-facing AI apps without proprietary foundational models will be the first casualties of market consolidation. Investment capital is shifting from broad AI speculation toward firms with defensible technical barriers.

V. Key Focus Today

🇯🇵 Bank of Japan interest rate decision: a hike to 1% is widely priced in; watch post-meeting remarks for clues on additional tightening in October.

🇦🇺 RBA cash rate decision: investors assess whether Australia will follow the global shift toward higher rates amid renewed Fed hike expectations.

🏠 US May housing starts and building permits: gauge residential sector resilience amid persistently high borrowing costs.

🗣️ The G7 Summit continues; monitor joint communiqué language covering the Iran shipping pact, Ukraine conflict, and cross-border tariff disputes.