A Peace Deal in Iran: 8 Key Items Shaping the Stock Market Monday

These are the early headlines and other items poised to influence the market at the start of the trading day. As we share this collection of market drivers, U.S. equity futures point to a positive start to the trading week ahead.

1. The US and Iran said they reached an interim peace agreement to reopen the Strait of Hormuz and move further toward ending a war that’s killed thousands of people across the Middle East. (Bloomberg)

Trump said the Strait of Hormuz would be reopened on Friday and he had ordered a lifting of the blockade on Iranian ports. A senior Iranian official said the Strait of Hormuz would be reopened “to all commercial vessels” once the memorandum was signed. (Reuters)

All sides have said the memorandum of understanding on an end to the war will be signed in Switzerland on Friday. Iran’s Deputy Foreign Minister Kazem Gharibabdi said the memorandum would then be published. (Reuters)

Oil is falling, stock futures are up, and that is going to lead us to do some fine-tuning with a few of the Pro Portfolio’s positions later on Monday morning. Stay tuned!

2. If it does, in fact, reopen and ships move through, that could have an enormous impact on the flow of oil and a range of other goods, providing a big jolt to the global economy. But a lot can happen between Sunday night and Friday. (WSJ)

A US-Iran deal intended to reopen the Strait of Hormuz within days has been met with caution by shipowners and traders, with many saying they would need more details in order to assess whether safe transits are possible after months of false starts. (Bloomberg)

We’ve been vocal in our view that details, and by that we mean the final details, of a peace agreement will be critical. It seems that we aren’t the only ones. And as The Wall Street Journal correctly points out, a lot can happen in the coming days that could raise questions about Friday’s deal signing, framework reveal and the opening of the Strait.

Israeli officials said the country is not bound by the U.S.-Iran agreement to end its fight with Hezbollah or to pull its forces out of Lebanon. President Trump, Pakistani mediators, and Iran said the deal includes a cessation of hostilities on all fronts, including in Lebanon.

Cue one of the most well-known Yogi-isms from Yogi Berra, “It ain’t over ’til it’s over.” That’s why we’ll only be doing fine-tuning with the Pro Portfolio later on Monday morning.

3. Treasuries advanced across the curve as investors dialed back expectations for Federal Reserve interest-rate hikes following news of a deal to halt the Iran war. Yields dropped on every tenor, led by shorter maturities that are among the most sensitive to changes in monetary policy. Swaps traders are now pricing in about a 70% chance of a quarter-point Fed hike by December, down from about 80% on Friday. Brent crude fell more than 5%, easing concern over inflation. (Bloomberg)

That drop in the odds of a December rate hike may seem counterintuitive given what we presented and discussed above. However, the length of time to get oil production facilities back up and running, uncurl supply chains that have been snarled due to the U.S.-Iran war, and pricing action by companies in recent months do not point to a sudden drop in inflation data over the coming months.

That said, with the prospects for a deal to be signed on the horizon, the question we’re pondering is how that will impact what new Fed Chair Kevin Warsh has to say on Wednesday.

4. New Federal Reserve Chairman Kevin Warsh has talked at length in recent years about the U.S. central bank’s balance sheet, the need to say less about interest rates and why it should not dip into issues like climate change. A Fed press conference on Wednesday, though, will mark his first substantive comments from the chairman’s perch about what’s happening with inflation, unemployment and the economic outlook as he makes a rhetorical turn from the abstract words of a policy analyst to ‌the concrete, potentially market-moving words of the world’s most important central banker. (Reuters)

That’s right, Warsh makes his Fed policy press conference debut Wednesday afternoon following the Fed’s latest policy decision and updated Set of Economic Projections (SEP). On the one hand, we will be listening intently to what Warsh says about the economy, inflation pressures, tariffs and monetary policy, but on the other we’ll be mindful of what he doesn’t say. Warsh has been a critic of the Fed being too communicative, including the SEP and telegraphing policy statement language.

The potential risk we see is Warsh not being as forthcoming as the market has become accustomed to under recent Fed chairs. Time will tell.

5. Global drugmakers have been ramping up U.S. manufacturing and stockpiling inventory as the Trump administration moves to impose 100% tariffs on branded drugs unless companies cut prices or make medicines domestically. Although enforcement is delayed for companies investing in U.S. manufacturing, the policy has already prompted fast-tracked projects, price cuts and direct-to-consumer sales. (Reuters)

President Trump warned that France is at risk of a fresh trade war with America — declaring in an exclusive interview with The Post that unless Paris axes its digital tax on American tech giants, the US will “have no choice” but to slap 100% tariffs on French wines. (NY Post)

Most of the market is focused on the U.S.-Iran headlines and prepping for what Warsh will say later this week. We are in the camp as well, but the above is a reminder that tariffs remain a key part of the White House’s playbook with the intent of rebuilding what some have called a “tariff engine.” We’ll continue to watch developments on this front, noting the current G-7 meeting that runs through Wednesday.

6. Fox Corporation and Roku, Inc. (Monday) announced they have entered into a definitive agreement under which FOX will acquire Roku for $160.00 per share in a combination of cash and FOX Class A common stock, valuing Roku at approximately $22 billion in enterprise value… Allen & Company LLC is serving as lead financial advisor to Fox Corporation. Morgan Stanley & Co. LLC is also serving as a financial advisor to FOX and Morgan Stanley Senior Funding, Inc. is providing a committed $12 billion bridge financing facility. (PR Newswire)

If the SpaceX (SPCX) IPO at the tail end of last week wasn’t enough to remind us about the prospect for investment banking fees this quarter, the Fox (FOX) takeover bid for Roku (ROKU) is another. Fortunately, Morgan Stanley (MS) shares are involved in both transactions as well as several others, and that suits us just fine given the Pro Portfolio’s position in the shares.

7. Economic data today per TipRanks: Empire Manufacturing Index (June), Industrial Production & Capacity Utilization (May), NAHB Housing Market Index (June).

8. Companies reporting today per TipRanks: PM – Dave & Buster’s (PLAY).

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At the time of publication, TheStreet Pro Portfolio was long MS.