U.S.-Iran “Phased Agreement” Raises Market Concerns: Ceasefire First, Nuclear Issue Deferred

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Summary:

The U.S. and Iran agreed to a 60-day ceasefire and the reopening of the Strait of Hormuz; markets are increasingly betting that the Federal Reserve, under Kevin Warsh, will keep interest rates higher for longer...

Key Headlines

1. Preliminary U.S.-Iran agreement on the Strait of Hormuz emerges: 60-day ceasefire to reopen the shipping lane, while nuclear issues are postponed for later negotiations

2. Trump demands the signing of the “Abraham Accords” first; Saudi Arabia responds

3. The U.S. and Iran are working to resolve wording disputes related to the nuclear issue and sanctions relief

4. A potential U.S.-Iran deal triggers divisions within the Republican Party

5. The U.S. says strikes on Iranian vessels were “defensive” and do not signal the collapse of the ceasefire agreement

6. Markets bet the Federal Reserve under Kevin Warsh will maintain higher interest rates for longer

Details

Preliminary U.S.-Iran Agreement on the Strait of Hormuz Emerges: 60-Day Ceasefire to Reopen the Shipping Lane, Nuclear Issues Deferred

According to a memorandum of understanding reached between the United States and Iran, both sides agreed to extend the current ceasefire for 60 days. During this period, the Strait of Hormuz will be reopened, allowing Iran to freely export oil (effectively lifting the maritime blockade), while negotiations on measures to limit Iran’s nuclear program will continue.

Senior White House officials stated that Washington has not yet committed to immediately unfreezing Iranian assets or lifting sanctions, which Iran considers a key prerequisite for ensuring the agreement does not collapse. The main disagreement centers on the handling of roughly 400 kilograms of enriched uranium: the United States demands a 20-year suspension of uranium enrichment activities, while Iran advocates for a shorter timeframe and insists that the dilution of enriched uranium must take place domestically under regional rather than international supervision.

Israeli Prime Minister Benjamin Netanyahu has convened the security cabinet to assess the situation, expressing concern that the agreement could ease economic and military pressure on Iran at a time when the regime is vulnerable, while failing to address the issue of Hezbollah in Lebanon. Gulf states are also uneasy, fearing that Iran could emerge stronger than before the conflict by using the Strait of Hormuz as leverage.

Markets remain cautious about the framework agreement. Trump stated that he is in no rush to finalize the deal, and the maritime blockade will remain in place until the agreement is formally signed and certified. Meanwhile, difficult issues such as Iran’s nuclear program have been postponed to later negotiations. This phased strategy resembles the Gaza ceasefire model, which, even after seven months, has yet to resolve its core disputes.

Trump Demands the “Abraham Accords” Be Signed First; Saudi Arabia Responds

According to a May 25 report by Saudi Arabia’s Al Arabiya TV, after U.S. President Donald Trump called on Saudi Arabia and other countries to sign the “Abraham Accords” and normalize relations with Israel before a U.S.-Iran agreement is reached, a Saudi source stated that Riyadh’s position remains unchanged.

The source emphasized that Saudi Arabia’s stance on the Palestinian issue has not changed and that an irreversible path toward Palestinian statehood is necessary. The report cited Saudi Arabia’s longstanding position that normalization with Israel will not occur unless a Palestinian state is established.

U.S. and Iran Working to Resolve Wording Disputes Related to Nuclear Issues and Sanctions

U.S. officials stated that disputes over the wording of texts related to Iran’s nuclear program and sanctions relief have delayed the finalization of the ceasefire agreement. However, all parties remain optimistic that these differences can be resolved relatively quickly.

One U.S. official noted that a delegation composed of senior members of Iran’s negotiating team arrived in Qatar on Monday. Given Qatar’s mediation role, this is viewed as a positive signal.

Potential U.S.-Iran Agreement Sparks Republican Infighting

According to multiple foreign media reports, U.S. efforts to reach an agreement with Iran have triggered fierce backlash from several Republican hardliners. In response to criticism within the party, President Trump and Secretary of State Marco Rubio publicly defended the negotiations.

Analysts believe that with the midterm elections approaching and the Iran conflict pushing up inflation and weighing on the broader economy, the U.S. government is eager to extricate itself from the conflict, further intensifying divisions within the Republican Party.

U.S. Says Strikes on Iranian Vessels Were “Defensive” and Do Not Signal the End of the Ceasefire

According to Fox News, a senior U.S. official disclosed new details regarding recent U.S. military strikes on Iranian targets. The official stated that U.S. forces detected two Iranian vessels laying naval mines in the Strait of Hormuz and immediately took action to destroy them.

In addition, the U.S. military struck a surface-to-air missile site near Bandar Abbas. According to the U.S., the missile site was targeting American fighter jets at the time and posed a direct threat.

The senior official stressed that these actions were “defensive strikes” and do not mean that the fragile ceasefire agreement between the United States and Iran has collapsed. Two sources also confirmed that the clash should not be interpreted as the end of the ceasefire.

Markets Bet the Federal Reserve Under Kevin Warsh Will Keep Rates Higher for Longer

The spread between U.S. 5-year and 30-year Treasury yields narrowed to around 81 basis points, the lowest level since May 2025. This spread is an important indicator of the premium investors demand for holding long-term U.S. government bonds.

The move was mainly driven by a sell-off in short-term Treasuries, which are more sensitive to changes in Federal Reserve policy expectations. Traders have therefore increased bets that under new Chair Kevin Warsh, the Federal Reserve may keep interest rates at elevated levels for a longer period.

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