The Freedom Curtalis
The chances of a large, wide-scale recovery in the event of reopening the Straits of Hormuz have probably declined over time, analysts estimate, although some markets as well as some assets, have greater room for rise than others.
In the Capital Economics, One of these assets that can benefit is Gen. If anything, the reopening of Hormuz is probably necessary to avoid further interference.
What to expect from any relief rally
The climate in the markets is quite positive at the moment, thanks to optimism about a US-Iran agreement. US President Trump noted this weekend that an agreement "has largely negotiated" and reports indicated, most importantly, that it would include opening the Straits of Hormuz. Of course, as Capital Economics points out, there have been several wrong signals for this much-discussed "opening" in the last two months, and Trump even downgraded last 24 hours the chances of an upcoming agreement. Therefore, there is certainly room for a greater upward course if the good news is finally confirmed.
But The house still believes that there are some things that may prevent this positive development. In this context, it lists the following three important factors:
First, energy prices will not immediately return to levels of "normality", i.e. pre-war levels, despite any initial dive. This means, among other things, a constant shock in terms of trade, at the expense of the currencies of the net energy importers.
Second, interest rates will probably not be reduced this year in most major economies, even if the war is over. Thus, the bond rally will be particularly large, according to Capital Economics, only in any country/regions the expectations of interest rates continue to be quite high, such as the United Kingdom, but not the USA.
Thirdly, And perhaps most importantly, the appetite of investors for risk was very resistant during the war. This certainly limits the margin for a large recovery of risk assets (or higher risk currencies). It is true, Capital Economics notes, that not all market sectors have done just as well, and stock valuations have still been reduced in all sectors since the beginning of the war.
But part of this is probably a consequence of the highest returns of "safe" assets, which seem unlikely to return immediately to their pre-war levels, the house points out.
Indeed, the US equity risk premium appears to have decreased during the war. Perhaps it had been further reduced in the absence of the conflict. However, Capital Economics' sense, as it notes, is that hopes for major future profits probably depend much more on increasing the profits of technological companies than on the rapid return of investors' appetite for risk, which, in fact, is already strong.
Takaichi is not a Trass in terms of Yen
Something that has been hit quite hard by the war is the reputation of the Japanese gen as a safe haven, highlights Capital Economics. The current situation is like a perfect storm for the currency, with bond yields to all the world rising and a shock having hit the terms of trade.
However, the house believes that this explains most of the problems of the yen, if not all. Granted, the combination of a weaker currency, the increasing yields of long-term bonds and a prime minister with instincts in favour of fiscal incentives, raises unpleasant comparisons with Liz Trass of the United Kingdom. However, the country's budgetary position, in Capital Economics' view, is not so bad. And, despite the irregular moves made by Japanese bonds (which in any case, the house does not believe are mainly fiscal risks), the movements of the yen have actually been well explained by the shift of the relevant yields to the front end of the yield curve, except for the intervention periods in the exchange balance.
The problem, however, is that the yields of short-term bonds continue to undoubtedly indicate a currency that "should" be much weaker and perhaps above the level of 160 against the American dollar, the apparent limit set by the Japanese authorities. If a war agreement in Iran does not give the yen any lasting relief, it is almost certain that there will be further intervention, the Capital Economics appreciates.
The story of the week
Rally relief in specific assets expects and the global financial advisor deVere Gru p with an agreement to open the Strait of Hormuz as it will lead to a sharp decline in fears of oil-related inflation.
Bond markets are expected to have a central role in reaction, after violent sell-off which pushed the odds sharply higher in recent weeks. The performance of the 10-year American bond increased to 4.7% this month, among the highest levels since early 2025, while the performance of the 30-year bond moved over 5%, levels not observed since the global inflationary crisis retreated.
"The bond markets have predicted a dangerous combination of higher inflation, increased oil prices and geopolitical instability. Investors feared that the Ormuz Strait crisis could develop into a lasting inflationary shock throughout the global economy," the house notes.
Slow Brent oil rose sharply during recent instability, with analysts warning that prices could climb to $120 – $140 if the disruption continues throughout the summer.
"A credible deal to open the Straits will quickly change the psychology of the market, because a huge geopolitical premium has been integrated into energy prices," deVere notes. "If oil retreats sharply, inflation expectations are declining at the same time and bond markets are likely to rise strongly. The lowest yields could become one of the biggest stories of the week, because recent movements in the sovereign debt markets were extreme," he adds.
And stock markets are also expected to react strongly, although some branches will benefit clearly more. "The fall in yields combined with lower energy prices creates a particularly supportive background for shares," the house stresses. Technology shares, in particular, are likely to benefit, because lower bond yields improve valuations for developing companies. Industry, airlines, transport companies and consumer-focused sectors they could all have a sharp rise if investors came to the conclusion that the risks of energy disruption are weakening."
Foreign exchange markets are expected to shift rapidly as the defensive position relaxes. "US dollar strengthened during crisis because investors rushed to security". A de-escalation scenario probably supports the renewed appetite for risk-sensitive currencies, such as the euro, pound, Australian dollar and many emerging market currencies, deVere estimates.
Ο χρυσός, ωστόσο, ενδέχεται να παρουσιάσει βραχυπρόθεσμη αδυναμία. “Εάν οι αποδόσεις των ομολόγων μειωθούν σημαντικά και οι επενδυτές στραφούν ξανά προς τα περιουσιακά στοιχεία υψηλού κινδύνου, ένα μέρος του κεφαλαίου είναι πιθανό να απομακρυνθεί από τον χρυσό βραχυπρόθεσμα”.
Οι τελευταίες εβδομάδες κυριαρχούνταν από τον φόβο ότι ένα ακόμη κύμα πληθωρισμού αναπτύσσεται στις αγορές ενέργειας. “Εάν η διπλωματία κερδίσει έδαφος, οι επενδυτές θα μπορούσαν να δουν ένα ισχυρό ράλι ανακούφισης να επεκτείνεται γρήγορα σε ομόλογα, και μετοχές”, καταλήγει ο οίκος.
