Trump's Iran agreement is a massive buy signal for stocks

By Kenneth Rapoza

Hyperventilating experts were wrong about the Iran war. These are the two sectors to buy right now.

The newly signed agreement to end the Iran war is expected to reopen the Strait of Hormuz to shipping and relieve pressure on global markets.

Investments in technology's future and the reindustrialization of America should do quite well.

The Iran war has made a lot of hyperventilating experts look silly and biased, a no-no for any serious investor or geopolitical analyst worth their salt. In listening to them, one would believe the Strait of Hormuz was the only place to get fuel and fertilizer to the world. The fact that similar warnings were made about the Ukraine war was lost on them.

Yes, markets get disrupted. Then they adjust. Quite simply, there were always a lot of moving parts to the Iran war.

The war's direction was dependent on three actors: Iran, the U.S. and Israel. Iran and the U.S. have apparently had enough. Israel says it's "alarmed" by the deal. Israel is the wild card, and everyone knows it.

The war appears to be winding down. President Donald Trump signed the memorandum of understanding (MOU) between the U.S. and Iran on Wednesday, establishing a framework for peace.

For investors, that means you can rest easy about stocks. Investments in technology's future and the reindustrialization of America should do quite well.

The agreement to end the hostilities in the Gulf establishes an immediate ceasefire, reopens the Strait to oil (CL00) traffic, ends the U.S. naval blockade on Iran (which was a way to choke Iran of money from its oil exports), and sets a 60-day window for broader nuclear negotiations. This can go either way, of course.

"The MOU is an agreement to have an agreement," said analyst Tony Nash, a contributor to Mainstreet Alpha, a subscriber-based markets and geopolitics publication. "It's safe to say that ship insurance levels probably won't snap back to pre-war levels, but we have to also think about how this relates to the midterm elections in November. If Trump can say we have negative year-on-year inflation by September and we have mortgage rates going down, Republicans will win. The narrative is already out there with Trump talking about costs coming down. You might even see deflation."

Meanwhile, the experts in Europe are still a nervous wreck. Joachim Nagel, a European Central Bank board member and president of the Bundesbank, said on Monday: "There is no relief in sight for the foreseeable future." Even if the Strait were fully navigable ?immediately, he added, "it will take months for the oil supply to return to normal."

Nagel is giving the standard Western consensus about oil supply: A return to prewar production and refining levels would take months or even years.

I'm not buying it. In its first look into 2027, the International Energy Agency said it foresees the return of an oil glut due to record investments. The IEA acknowledged the still higher-than-normal uncertainty about the near term, but if Hormuz really does stay open, we will indeed have oil everywhere.

Tankers are already massing outside the Strait to fill up. Iran has 150 million barrels of oil - which they need to bring to market ASAP - sitting on the water, according to Brian McCarthy, head of investment research firm Macro Lens. "Damage to [Gulf] production infrastructure was limited, with most already repaired," he said.

"Peacemaker" Trump is back, for now. Will Israel get a vote? The agreement stops well short of the decisive victory that Israeli Prime Minister Benjamin Netanyahu was hoping for. There is no real regime change in Iran, and no decisive settlement of Hezbollah's position in Lebanon.

Lower oil prices and lower U.S. Treasury bond yields create easier financial conditions for stocks. Meanwhile, a pro-growth Kevin Warsh at the Federal Reserve will likely frame recent inflation as a war problem, which is supposedly in retreat now. That will allow the Fed to remove at least one hike from the expected policy path without signaling economic weakness.

Core and headline PCE inflation are still flashing red in the lagging indicators, but commodity signals are moving in the other direction. In that case, the price of gold (GC00) could weaken as the market shifts from "lower yields because growth is cracking on account of the Gulf" to "lower yields because the supply shock is fading," per Vladimir Signorelli, president of Bretton Woods Research, a macroeconomic forecasting firm.

The good news on Iran becomes equity-supportive and gold-negative. So long as the geopolitical premium gets wrung out of crude, and Israel plays it cool enough not to blow up the agreement, this war could really be over. The real confirmation would be Netanyahu signing on. Then Trump can invite both him and Iranian President Masoud Pezeshkian to watch the Independence Day fireworks from the White House lawn. Another war movie over. Let the credits roll.

Kenneth Rapoza is an analyst for the Coalition for a Prosperous America, which represents U.S. producers and workers. He is a former journalist who has reported from Brazil and covered the BRIC economies.

-Kenneth Rapoza

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06-18-26 1909ET