The Iran deal is done, but oil isn't going back to USD 65. Here’s why.

One hundred and six days after Iranian forces closed the Strait of Hormuz and sent oil above USD 125, the US and Iran agreed on Sunday night to stop fighting.

In May, we argued that both sides were under genuine pressure — Trump facing a midterm election deadline with gas at USD 4 a gallon, Iran bleeding USD 4.8 billion in oil revenues in under a month of the blockade — and that some form of agreement was probable. That call is now confirmed.

Iran's Supreme National Security Council issued an official statement on Sunday evening confirming the immediate and permanent termination of military operations on all fronts — including Lebanon — and the complete lifting of the US naval blockade. The formal signing takes place in Geneva on Friday 19 June, with technical talks in Doha this week working through the remaining details.

Markets moved as you would expect. Brent crude fell to approximately USD 83 at the time of writing — down sharply from pre-announcement levels and its lowest since before the war escalated — while KOSPI surged more than 5%, the Nikkei rose 4.9%, and S&P 500 futures climbed 1.2%.

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Oil soars past USD 125 on extended blockade. What it means for your portfolio.

Both sides agreed to stop fighting. The hard parts haven't started yet.

What was actually agreed — and what wasn't — matters more than the headline.

Under the MoU as confirmed by Iran's Supreme National Security Council and Deputy FM Gharibabadi, the ceasefire takes effect immediately and permanently on all fronts, the US naval blockade on Iranian ports lifts immediately and completely, and the Strait of Hormuz reopens to all commercial vessels. A sixty-day negotiation process on nuclear material begins after signing, and a mechanism for frozen asset release is established.

What the MoU does not contain is equally important. The specific amount of frozen assets and when they are released remain disputed. The terms of Hormuz governance — whether Iran can charge fees, and who controls transit — are unresolved. What happens to Iran's uranium stockpile is deferred entirely to Phase 2. The conditions under which sanctions are permanently lifted are not in the document.

Former US General Mark Kimmitt put it plainly on CNN: "This is not the deal. This is just the MoU needed to end the current conflict. We're nowhere near hitting the details or the hard parts."

Four unresolved gaps that could unravel Phase 2 — and your portfolio.

The deal is real — but the US and Iran are publicly describing the same MoU in incompatible ways on the four issues that matter most. These are not messaging differences. They are structural gaps, and the next sixty days will either resolve them or unravel them.

The US and Iran have fundamentally different views on Hormuz management. Trump posted that Hormuz is "permanently toll free" — US Ambassador Waltz called service fees "completely unacceptable, and frankly, illegal in international law." Iran's position is the opposite, and it is not rhetorical; it is an operating institution. The Persian Gulf Strait Authority has already registered over 300 vessels for paid transit permits at USD 1.5–2 million per vessel since May, with revenues going into Iran's treasury. An adviser to Iran's negotiating team confirmed on Sunday: "The strait is in our hands. We can close it any time we want at an hour." 

The US and Iran also disagree on Lebanon — and Israel, which signed nothing, is the wildcard. Iran secured "all fronts including Lebanon" in the SNSC statement, but the Dahiyeh strike on Sunday morning showed what that means in practice — Israel informed CENTCOM in advance and struck anyway. Ghalibaf, Iran's lead negotiator, was direct: "The US either lacks the will to fulfil its commitments or the ability to do so." Netanyahu's election is in September or October, and his domestic incentives are directly opposed to Phase 2 succeeding quietly.

On frozen assets, the two sides don't just disagree on the amount — they disagree on the sequence. Iran expects USD 25 billion released on signing; Rubio told the Senate nothing is released until Iran performs. The critical detail: Iran's Deputy FM Gharibabadi confirmed that entry into the sixty-day nuclear talks is conditional on the US first releasing funds. The US wants nuclear performance before money moves. Iran wants money before nuclear talks begin. If neither side moves first, the sixty-day clock may never start.

On nuclear material, the gap is physical, not just diplomatic. Iran collapsed tunnels and booby-trapped its uranium cache with explosive mines in the weeks before signing — the stockpile is effectively inaccessible. The US wants it destroyed and removed from Iran. The MoU records Iran's preference: dilution on Iranian soil. Those two positions are irreconcilable at current stated terms, and they are the first item on the agenda when nuclear talks begin.

What does all of this mean for oil prices — and for your portfolio?

Oil stays higher for longer — even with a deal.

Oil doesn't flow the moment a ceasefire is signed — it flows when mines are cleared, insurers are satisfied, and wells are back online. Rubio confirmed in Senate testimony that Iran has mined "large segments" of Hormuz, and clearing them requires Iran's active cooperation in identifying where they are — a physical operation measured in weeks to months that no diplomatic urgency can accelerate. Marine insurers won't reprice a conflict zone on a press conference; S&P Global Energy's Daniel Evans put it plainly: "It's going to take time for people to feel comfortable and for insurance to be in place." Gulf wells shut down for three months don't ramp back in days either — ADNOC's CEO Sultan Al-Jaber has said it would take at least four months to reach 80 percent of pre-conflict output, with full recovery not before mid-2027.

Beyond the timeline, some of the damage is permanent — and what isn't permanent will take longer to fix than markets are pricing. Qatar's LNG facilities sustained direct hits to approximately 17% of export capacity, with repair timelines running to three to five years. Frontline's CEO confirmed that well pressure loss means there will simply be less oil from the Middle East than before the war — not temporarily, but structurally. With the risk of re-escalation still live, producers face a further disincentive — costly repairs and restarts before Phase 2 is resolved are investments many will defer until the political picture clears. Add it together, and even the optimistic scenario — a lasting deal achieved — implies several more months of elevated oil prices at minimum.

The pessimistic scenario is worse. If Phase 2 collapses, the consequences are not abstract — oil prices jump back up, armed conflict may resume, and Hormuz closes again. Iran will also have less incentive to keep the Houthis quiet: a senior Iranian official named the Bab-al-Mandab — the relief valve that has kept oil below USD 120-plus throughout the war, carrying 7.2 million barrels per day via Saudi Arabia's Red Sea rerouting — as Iran's explicit reserve option if the deal fails. 

There is one genuine offset. The worst-case scenario — Brent spiking toward USD 150 as inventories hit critical lows — is now off the table. Chinese oil demand appears to be shifting structurally, not cyclically, as EVs and mass transit displace fuel consumption at a pace that surprised even OPEC's own forecasters — and if that demand destruction is permanent, it caps the medium-term oil price ceiling. But it does not bring oil back to USD 65. Brent fell to approximately USD 83 on the announcement, still 28% above pre-war levels, and the supply-side constraints above remain fully intact.

Our view: oil stays higher for longer. A deal will not bring oil back to USD 65, it will not arrive at the pump overnight, and it will not switch off the inflation already running through food prices and utility bills. As long as inflation runs above target, rate hikes remain on the table.

Three steps for the sixty days ahead.

1. Don't mistake the signing for the finish line.

The MoU is done, but the risks haven't gone away — inflation is running above target, rate hikes are coming, and four structural gaps in Phase 2 could yet unravel the deal. None of that is a reason to sell everything. In 2022, the Fed's most aggressive hiking cycle in four decades drove the S&P 500 down 18.1%, and the two years that followed delivered back-to-back returns of 26.3% and 25.0% — one of the strongest recoveries on record. More recently, stock markets rebounded strongly in April even as the war continued. The right response to uncertainty is not to exit. It is to own the right things.

2. Reposition across equities — Asia first.

Asia is our highest-conviction market — and the case for it has nothing to do with the deal. Q1 results proved the earnings thesis while the strait was shut: Taiwan grew 14.6%, Singapore 6.0%, China 5.0%, and Japan 2.1% — all with Hormuz closed. At 13.4x forward earnings, the MSCI Asia ex-Japan Index is not pricing in perfection. The S&P 500, at 21.8x, is.

The rally in Asian semiconductor stocks has been strong — but we believe it has further room to run. Samsung's Q1 2026 operating profit grew eight times year-on-year; SK Hynix posted a 72% all-time-high operating margin on revenue that tripled — physical delivery numbers, not forward projections. We express this thesis through the Global X Asia Semiconductor ETF (HKEX:3119).

Between the US and Europe, we now see the US as relatively more attractive. We have downgraded Europe to Unattractive — its structural exposure to energy import costs and the defence reorientation already under way make it more vulnerable to the post-deal adjustment. The US remains Underweight for now. Add to Asia on pullbacks. Use any European relief rally to trim.

One exception within Europe stands out. The WisdomTree Europe Defence UCITS ETF (LSE:WDEF) rests on a structural rearmament cycle that predates this conflict and will outlast any ceasefire — NATO spending commitments don't reverse because a Gulf MoU is signed. The same rearmament dynamic is accelerating across Asia, where defence budgets are rising independently of the Gulf outcome. We express that theme through the WisdomTree Asia Defence Fund (NASDAQ:WDAF).

For fixed income, short-duration bonds are not the place to hide — they are the place to invest. When rates are rising, long-duration bonds suffer as their prices fall with every upward move in yields, while short-duration bonds mature quickly, returning capital that can be reinvested at the prevailing — and rising — rate. The inflation problem outlasts the announcement. So does the case for staying short.

3. Keep your regular savings plans (RSPs) running. 

A regular savings plan — same amount, every month, through the noise and into the recovery — works regardless of how the next sixty days play out. The investors who benefit most from the normalisation that follows are the ones who stayed invested in the right places through the uncertainty.

Table 1: Recommended products

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report holds positions in iShares Hang Seng Tech ETF, Global X Asia Semiconductor ETF, and WisdomTree Asia Defense Fund.