U.S.-Iran Deal Moves Closer, Equities Move Higher

Scott Poore, AIF^®, AWMA^®, APMA^®

June 01, 2026

Equity markets moved higher on news that a U.S.-Iran peace deal was closer to getting done. It was reported on Thursday of last week that a "memorandum of understanding" had been reached between the U.S. and Iran that would allow for a 60-day extension of the ceasefire, would re-open the Strait of Hormuz fully, and would give the two sides time to work out a specific agreement on Iran's nuclear program.¹ The original MOU was not a final binding resolution and over the weekend, according to the New York Times, the President sent a response back to Iran with tougher terms.² There is speculation that perhaps the tougher terms could be an attempt to force Iran to accept the original terms of the MOU. Time will tell. In the meantime, the price of oil is still elevated and shipping costs have increased with the decline in traffic in the Strait of Hormuz. The U.S. consumer, overall, is still spending, which would indicate a solid economic backdrop. Redbook Sales came in this week at +9.0%, which is well above the historical average of 4.4%.³ In addition, Bank of America CEO Brian Moynihan stated this week, "Consumer spending in May is consistent with a strong economy."⁴ The U.S. consumer is fueling better corporate profits, and likewise, higher revenues. In the most recent earnings releases for the 1st quarter, S&P 500 companies have reported the highest revenue growth (+11.4%) in the last 4 years.⁵ If consumers have been able to withstand higher prices at the gas pump during the U.S.-Iran conflict, a reduction in gas prices, albeit not immediate, could prove a boon to spending moving forward. Inflation is running hot, but it is tied to the dramatic increase in oil prices. May is the first month since the U.S.-Iran conflict started where the price of oil actually declined.⁶ However, the price of gas at the pump is down by only 6%.⁷ It will take some time for oil and gas prices to adjust, assuming that a peace deal to end the conflict is codified. The effect on inflation will also take some time to play out. Producers and suppliers of goods and services affected by oil will not be reducing their prices overnight. In fact, the Cleveland Federal Reserve is forecasting May inflation, as measured by the Consumer Price Index, to come in at +0.46% and the year-over-year reading to be 4.18%.⁸ It's important to note, however, that the Federal Reserve has left interest rates steady during the recent increase in inflation. On Friday, Fed Board member Bowman stated, "Reacting to energy shock would add unwarranted restraint."⁹ The Fed has estimated the rise in inflation to be somewhat temporary and that raising the Fed Funds Rate at this point in time is not needed. According to Mickey Levy at Haven Analytics, oil's effect on inflation should run its course in 2-3 months.¹⁰ Before making any major changes to their portfolios, investors should stick to their current investment strategy consistent with their respective risk tolerance.

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The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

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