The dominant story heading into Thursday is the possibility of a negotiated end to the U.S.-Iran conflict. On Wednesday, it was reported that both sides were working toward a 14-point memorandum of understanding covering Iran's nuclear program, sanctions relief, and a Strait of Hormuz reopening. The S&P 500 and Nasdaq surged to new ATHs as the Euro Stoxx 50 also crept closer to its February highs.
The agreement is far from signed, however. Tehran confirmed it was reviewing the proposal and would respond via mediators in Pakistan. Trump himself posted that the war would end "assuming Iran agrees to give what has been agreed to, which is perhaps a big assumption." Markets are seemingly pricing in a meaningful step toward resolution, but not resolution itself.
Tokyo Catches Up in One Session
Japan's Nikkei 225 topped 62,000 for the first time on Thursday, catching up with its American counterparts after the Golden Week holiday closure. USD/JPY tells a different story: the pair sits near 156.38, with the yen having strengthened roughly 2% over the past month. Reports suggest Tokyo deployed approximately $32 billion in intervention during the Golden Week window. With the pair near its strongest level since February, traders will be watching for further intervention if USD/JPY pushes back above 158.
Oil Still Unconvinced
Despite the optimism, oil is not behaving like a market that believes the Strait is about to reopen. Brent fell around 1.85% to $99.40 on Thursday, WTI near $93.21: volatile, but directionless. ING's head of commodities strategy notes that roughly 13 million barrels per day of disrupted supply is being offset by inventory drawdowns that are declining rapidly, meaning the energy inflation pressure on central banks won't ease until a deal is actually signed.
A Fed in Transition
Powell's final FOMC meeting ended last week with rates held at 3.50–3.75% but four dissents: the most since October 1992. Three objected to keeping an easing bias in the statement, a sign the hawkish bloc is growing. Kevin Warsh cleared the Senate Banking Committee 13-11 along party lines, with a full Senate vote expected the week of May 11, just ahead of Powell's May 15 expiry. Warsh has flagged a new inflation framework and communication overhaul, but what that means for the rate path remains genuinely open.
Until both the Iran situation and the Fed transition resolve, every headline carries outsized weight.