The Variable That Drove Every Market Move for Three Months Just Went to Zero

The United States and Iran reached a deal Sunday night to end the war that began February 28. Trump ordered the immediate removal of the naval blockade. The Strait of Hormuz reopens to all shipping. The formal signing takes place Friday in Switzerland. Kevin Warsh chairs his first FOMC meeting in hours. The inflation picture that drove every market move for the past three months just changed overnight.

The war began on February 28. The Strait of Hormuz closed the same day. In the 107 days since, Brent crude rose from roughly $68 to above $99. Energy prices surged 23.5% year-over-year in the May CPI report and accounted for more than 60% of the monthly headline increase. The 10-year Treasury yield climbed from 4.05% to 4.57%. The S&P 500 fell as much as 10% in March before recovering on ceasefire hopes, then fell 4.5% again in the first week of June when CPI crossed 4.2%, CENTCOM struck Iran, and 172,000 jobs landed against 80,000 expected.

Every one of those moves was, at its core, about oil. The jobs report mattered because it removed rate-cut expectations. CPI mattered because energy was the transmission mechanism. The chip selloff mattered because rising yields compressed multiples. The CENTCOM strikes mattered because they threatened to keep the strait closed. Remove the strait closure from the equation, and the arithmetic changes in every direction at once.

The oil math. WTI closed Friday at $84.88, already down more than 10% from its May high. The strait reopening adds roughly 17 million barrels per day of shipping capacity back to global markets. That volume will not resume instantly. The MOU specifies shipping returns to “full capacity within a maximum of 30 days.” But futures will price the expectation immediately. If WTI falls toward the $68–72 range where it traded before the war, the energy input to CPI reverses entirely. May’s 4.2% headline print was built on $94 oil. June and July will be built on whatever price the market settles on this week.

Treasury Secretary Bessent told Fox News Friday that “the challenging time with gasoline will pass.” He was not speculating. He was previewing a policy outcome. The administration tied its inflation narrative directly to the strait. If gasoline falls $0.50 to $0.80 per gallon over the next 30 to 60 days, the consumer relief is tangible, the CPI impulse reverses, and the political case for rate cuts reopens.

The Fed’s timing problem. The FOMC convenes today. The dot plot, the Summary of Economic Projections, and Warsh’s press conference land tomorrow. The committee members submitted their projections before the deal was announced. Those projections were built on an economy with oil above $90, a closed strait, 4.2% headline CPI, and no clear path to energy relief. The economy they walk into Monday morning has none of those conditions.

The rate decision itself is settled. The fed funds rate holds at 3.50–3.75%. The question is everything else. J.P. Morgan’s Phil Camporeale expected “an explicit move away from a bias toward easing to a neutral stance.” Goldman Sachs pushed rate-cut expectations into 2027. But those calls were made before the strait reopened. If Warsh acknowledges in his press conference that the inflation impulse was geopolitical rather than structural, the market will reprice rate expectations within minutes. If he does not, the dots and the projections will land as hawkish artifacts of a world that no longer exists.

What the deal does not resolve. The 60-day MOU opens nuclear negotiations, not a nuclear deal. Trump reportedly told allies that strikes could resume if an accord is not reached. Iran circulated at least three competing versions of the agreement text before it was finalized. Israel’s defense minister said the country is “staying in south Lebanon” and would hit Iran “with full force” if it strikes again. The deal ended the war. It did not end the tension.

For markets, that distinction matters over months but not over days. The immediate repricing is about oil, inflation, and rates. The longer-term question is whether the 60-day framework produces a nuclear deal or collapses. If it collapses, the strait could close again, oil spikes, and the cycle restarts. If it holds, the second half of 2026 begins from a fundamentally different baseline: lower energy costs, falling headline inflation, a potential path back to rate cuts, and an equity market no longer pricing a war premium.

The week. Monday: FOMC begins. Markets open with the deal priced in. Watch oil futures at the 6 p.m. ET Sunday open and equity futures at the same time. Tuesday: Rate decision at 2:00 p.m. ET. Dot plot and projections simultaneous. Warsh press conference at 2:30 p.m. Friday: Formal signing ceremony in Switzerland. The next two days will set the tone for the rest of the quarter.