What a U.S.-Iran Peace Framework Means for Markets and Portfolios

The U.S. and Iran have announced a preliminary agreement aimed at ending the four-month conflict that has weighed on the global economy. Financial markets responded positively, with stocks rising, oil prices declining, and interest rates moving lower. Understanding what this agreement means for investors requires looking at both the near-term developments and the broader market context.

Described as a “memorandum of understanding,” the deal includes the reopening of the Strait of Hormuz, with a final agreement expected to be reached over a 60-day period. While encouraging, particularly from a humanitarian standpoint, many questions remain. The full text has not been released, and unresolved issues such as Iran's nuclear program and sanctions could still complicate the path forward. Investors should also keep in mind that markets have already been trending positively and the economy has remained resilient throughout this period.

Energy prices are the primary channel through which geopolitical conflicts affect the broader economy. The effective closure of the Strait of Hormuz forced major Middle Eastern producers to scale back output, though oil prices had already begun declining, falling more than 25% from the April peak of $118 per barrel to around $85 before the preliminary peace deal was announced.¹ History shows that while Middle East conflicts can cause oil price spikes, these tend to be short-lived, and supply-and-demand fundamentals ultimately drive long-run prices. Economists often describe such supply-side shocks as “transitory,” meaning their inflationary effects fade once the disruption is resolved.

Gasoline prices peaked above $4.50 per gallon in late May before pulling back toward $4.00 per gallon. The latest Consumer Price Index report shows energy prices rose 23.5% year over year, with gasoline up 40.5%, pushing headline CPI to 4.2% in May, its highest level in several years.² Notably, core inflation, which excludes food and energy, rose only 2.9% year over year in May, suggesting higher oil prices have not broadly spread across the economy. If oil prices continue to trend lower, easing price pressures could support the Fed as it manages inflation alongside a strengthening jobs market.

Beyond energy, many asset classes have demonstrated resilience this year. The S&P 500's year-to-date return is hovering around 10%, supported by strong earnings growth and a healthy economy.⁴ Bonds have helped stabilize portfolios during periods of volatility, with the 10-year Treasury yield below 4.5% and the 30-year yield under 5%.⁵ International stocks have also performed well, continuing a positive trend from the prior two years.⁶ Eight of the eleven S&P 500 sectors are in positive territory, with the energy sector gaining approximately 27% year to date, while Information Technology has returned about 17.5%.

This broad-based performance underscores the value of maintaining portfolio balance across different areas of the market. Geopolitics, inflation, and interest rates are inherently difficult to predict, and holding a diversified mix of assets is the most effective way to manage risk while preserving growth opportunities.

Over the past century, geopolitical conflicts including wars, oil embargoes, and regional crises have repeatedly tested financial markets. While these events often produced short-term volatility, markets typically recovered and moved higher even before the underlying situations were fully resolved. As illustrated in the chart above, long-term performance has been driven by economic and market cycles rather than by individual geopolitical events.

The preliminary peace agreement is undoubtedly a positive development. Lower energy prices should reduce inflationary pressure, improve household purchasing power, and ease transportation costs for businesses, all of which support the broader economy. For investors, this moment also serves as a timely reminder of the importance of staying invested and keeping a focus on long-term financial goals.

The bottom line? A preliminary U.S.-Iran peace agreement has lifted markets and pushed oil prices lower. For investors, history shows that the best way to navigate geopolitical events is to focus on long-term trends and financial goals.

References

1. Clearnomics research, CME Group data as of June 12, 2026

2. https://www.bls.gov/news.release/cpi.nr0.htm

3. Asset classes included are MSCI Emerging Markets Index (EM), MSCI Developed Markets Index (EAFE), MSCI World Small Cap Index (Small Cap), S&P 500, balanced portfolio, fixed income, and MSCI World Commodity Producers Index (Commod.). The balanced portfolio is a historical 60/40 portfolio consisting of 40% U.S. large cap, 5% small cap, 10% international developed equities, 5% emerging market equities, 35% U.S. bonds, and 5% commodities.

4. Clearnomics research, Standard & Poor's data through June 12, 2026

5. Clearnomics research, Bloomberg index data through June 12, 2026

6. Clearnomics research, MSCI index data through June 12, 2026

Index Descriptions

S&P 500

The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90.

MSCI Emerging Markets Index

The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

MSCI EAFE Index

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

Bloomberg US Aggregate Bond Index

The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.