Market reactions and economic implications of the Iran-Israel ceasefire agreement

Markets breathed a very tentative sigh of relief this morning following the announcement that Iran and Israel have reached a ceasefire agreement. It appears that the Israeli government ultimately determined that a sufficient number of their objectives have been achieved without the need for regime change, something that would have generated significant uncertainty on multiple dimensions.

Whilst an end to the bloodshed is to be welcomed, the situation remains extremely fragile. A ceasefire announced by Trump several hours earlier proved short lived after an Iranian missile hit targets in Israel and Israel continued its bombing raids. There has subsequently been a missile fired from Iran into northern Israel although it is not clear if this was a rogue event nor if Israel will retaliate.

If the ceasefire holds – and there is no guarantee that it will - it will undoubtedly be greeted positively by markets as it will at the margin reduce uncertainty. However, the hostilities had only a limited effect on markets even during the height of the tensions so an ending to the war will likely have only a small positive impact.

The most important and profound way in which the ceasefire will impact financial markets is via the oil price, which had spiked by around 15% following the start of Israel’s attacks on Iran.

The sharp fall in the oil price overnight in response to the ceasefire will likely be viewed positively by investors. Not only will it help to reduce inflationary pressures, but it will also help support consumption trends and hence growth overall.

Please join us for a special client webinar on Thursday 26 June in which our experts will discuss the situation. This is in addition to our regular monthly webinar; the next one being scheduled for 2 July. If you would like to join either of these webinars, please contact your EFG representative.

Important Information

The value of investments and the income derived from them can fall as well as rise, and past performance is no indicator of future performance. Investment products may be subject to investment risks involving, but not limited to, possible loss of all or part of the principal invested.

This document does not constitute and shall not be construed as a prospectus, advertisement, public offering or placement of, nor a recommendation to buy, sell, hold or solicit, any investment, security, other financial instrument or other product or service. It is not intended to be a final representation of the terms and conditions of any investment, security, other financial instrument or other product or service. This document is for general information only and is not intended as investment advice or any other specific recommendation as to any particular course of action or inaction. The information in this document does not take into account the specific investment objectives, financial situation or particular needs of the recipient. You should seek your own professional advice suitable to your particular circumstances prior to making any investment or if you are in doubt as to the information in this document.

Although information in this document has been obtained from sources believed to be reliable, no member of the EFG group represents or warrants its accuracy, and such information may be incomplete or condensed. Any opinions in this document are subject to change without notice. This document may contain personal opinions which do not necessarily reflect the position of any member of the EFG group. To the fullest extent permissible by law, no member of the EFG group shall be responsible for the consequences of any errors or omissions herein, or reliance upon any opinion or statement contained herein, and each member of the EFG group expressly disclaims any liability, including (without limitation) liability for incidental or consequential damages, arising from the same or resulting from any action or inaction on the part of the recipient in reliance on this document.
The availability of this document in any jurisdiction or country may be contrary to local law or regulation and persons who come into possession of this document should inform themselves of and observe any restrictions. This document may not be reproduced, disclosed or distributed (in whole or in part) to any other person without prior written permission from an authorised member of the EFG group.

This document has been produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.