Market Reaction to the U.S.–Iran Interim Agreement
Deutsche Bank analyst Henry Allen, writing for Reuters on 22 June 2026, outlined four factors that limited the rally in risk assets after the U.S.–Iran interim deal, even as oil prices fell sharply.
First, the Federal Reserve’s hawkish stance pushed real yields higher, eroding the relief from the geopolitical development. Half of the officials on the Fed’s dot‑plot signaled at least one rate hike this year, and the newly appointed Chair, Kevin Warsh, stressed the priority of restoring price stability. Consequently, the U.S. 10‑year real yield closed at 2.22 %, its highest level in more than a year, effectively neutralising the initial market boost.
Second, Deutsche Bank noted that markets had already priced the conflict as a temporary disruption, so the upside from a resolution was limited. The oil futures curve had incorporated expectations of lower crude prices ahead of the deal, meaning the price relief was largely pre‑priced.
Third, equity valuations were already stretched after an historic two‑month rally in the S&P 500, which rose 16 %. Allen highlighted that such a rally has occurred only four times since World War II; three of those instances followed recessions, and only once did it happen in a non‑recessionary environment, a few months before the Black Monday crash of 1987.
Fourth, physical oil logistics remained constrained: traffic through the Strait of Hormuz was still “a fraction of its pre‑conflict levels,” and Brent crude prices stayed roughly 30 % above the start‑of‑year level despite the interim agreement.
Deutsche Bank concluded that longer‑term optimism remains justified. It argued that Fed‑driven hawkishness, driven by upside growth surprises, is a scenario markets can weather, and that the current environment differs materially from the conditions that preceded the 1987 market crash.
Key market indicators at the time of writing: the S&P 500 (US500) was down 0.14 %, crude oil (LCO) fell 3.74 %, and the U.S. 10‑year Treasury (US10YT) rose 1.03 %.