By Molly Schwartz, cross-asset macro strategist of Rabobank
The trouble with ceasefires is that they often require both sides to agree to a set of terms, and then actually cease fire. However, if the set of terms are not comprehensively established and neither side can be held accountable to pause hostilities, then the so-called “ceasefire” loses all meaning.
Yesterday morning, Secretary of War, Pete Hegseth spoke about the Iran war ceasefire in a press conference. According to Hegseth, the US has achieved a “historic and overwhelming victory.” We have previously highlighted that in order for the US to achieve its stated goal of ending Iranian nuclear programs, regime change plays a fundamental role.
Hegseth has explicitly said that regime change has been achieved, echoing Trump who posted on social media that Iran “has gone through what will be a very productive Regime Change!” However, the rhetoric out of the IRGC and the continued execution of Iranian protestors may indicate otherwise. Hegseth also said that Iran will “never have nuclear weapons” and that the Strait of Hormuz was indeed open for business.
At around 1:00pm ET yesterday, it was announced that the Strait of Hormuz was closed amid dispute over ceasefire terms. When a ceasefire is typically negotiated, this includes some formal written agreement. While that may be the case with the current “ceasefire”, the public has yet to see one. A lack of clearly defined and agreed upon terms leaves room for confusion.
Israel conducted what was referred to as the “largest attack yet” on Hezbollah in Lebanon yesterday, with Israeli PM Netanyahu asserting that Lebanon and Hezbollah were not included in the ceasefire agreement. Netanyahu also provided his view on the ceasefire, declaring that this ceasefire is not the end of the war, but rather a “station en route to achieving aims.”
The war certainly does not seem to be over, given Iran’s decision to close the Strait of Hormuz again, citing Israel’s “breach.” While the ceasefire announcement laid out by Iran does clearly state that the ceasefire extends to “Lebanon and other regions” (which may call into question the Iranian attacks on Israel, Kuwait, and the Saudi Arabia East-West pipeline in the ceasefire aftermath), the statement from the US does not, and Trump backed Netanyahu’s interpretation that Hezbollah was still fair game.
Closing the Strait of Hormuz, of course, also breaches the US stipulations for the ceasefire, including the “COMPLETE, IMMEDIATE and SAFE OPENING of the Strait of Hormuz.” Crucially, US Press Secretary Karoline Leavitt clarified that this also means Iran must operate the passage free of tolls or other duties.
EU players also released a statement to say that they “welcome the two-week ceasefire” and that their “Governments will contribute to ensuring freedom of navigation in the Strait of Hormuz.” The US Administration seemed skeptical of the EU’s commitment with Leavitt saying that over the course of the past few weeks, “they [the EU and NATO] were tested, and they failed.”
But the EU and NATO may have an opportunity to redeem themselves in Trump’s eyes. Iran’s Speaker of the Parliament, Mohammad-Bagher Ghalibaf, said on X that three clauses of Iran’s 10-point proposal had been violated, these being the aforementioned “ceasefire everywhere, including Lebanon and other regions,” as well as the “entry of an intruding drone into Iranian airspace,” and finally the “denial of Iran’s right to [uranium] enrichment.”
As Iranian Minister of Foreign Affairs, Abbas Araghchi said on X yesterday, the ball is now in the US’ court. Everyone, but the US right now, is still lobbing missiles. So will the US hold up its commitment to halt offensive measures or put an official end to the ceasefire?
Markets are awaiting a response from the White House as well. Financial markets eagerly digested the ceasefire news from Tuesday in earnest, with the S&P 500 jumping 2.4% yesterday on the open, and trading around the $6,750-6,790 level all day, despite headline fury.
Global macro markets were a little more sensitive to (war) hawkish headlines. While US Treasury yields gapped lower at the open, 2 year Treasury yields spent the day creeping higher 6bp to 3.79% from open, and 10 year yields up 3bp to 4.29%. But the market that (surprisingly) barely moved yesterday was crude oil. Crude one month futures fell more than $16 to $94/bbl after the news of a ceasefire first broke, but the Strait reclosing and the fragility of the ceasefire exposed resulted in minimal price action, with crude closing at around $96/bbl.
These market moves may provide some insight into the US Administration’s logic in attempting this ceasefire in the first place. While one school of thought suggests that a ceasefire is a way to walk back Trump’s pugnacious rhetoric from Tuesday morning, the Administration may also be banking on the temporary market reprieve. We have suspected that prior so-called “TACO” trades from the Trump Administration were partially driven by negative market reactions, like the stress in US Treasuries after Liberation Day in April of 2025, or last summer when Trump threatened to fire Fed Chair Powell.
A ceasefire announcement that is well-received by the market could soothe markets and inflationary expectations, as well as depress the price of oil—which it has done for the time being. Should the Trump Administration choose to ramp up offensive measures in two weeks (or even today), it’s possible that the jump in prices may be somewhat mitigated, as we’re bouncing off of a “suppressed” crude level of $94/bbl, as opposed to the $110/bbl level we were at earlier in the week. While the moving parts here are extremely complex and there is likely much more at play here than just “because markets,” the markets angle is still something to think about.
In other markets-related news, yesterday the Fed released the Minutes from the March 18 meeting. According to said Minutes, “most” FOMC board members said that a “protracted war could hit jobs” and “warrant rate cuts.” On the other hand, “many” board members said “inflation higher for longer could call for hikes.” These very insightful and directional comments maintained US OIS pricing expectations at no hikes nor cuts this year.