Israel–Iran Ceasefire: A Pause, Not Peace  

After nearly two weeks of escalating military tension, Israel and Iran failed to sign a formal ceasefire, and fighting did not end completely. Instead, on June 24, a temporary and conditional pause in hostilities emerged. This initiative was linked to remarks made by the U.S. President Trump and subsequent comments from Iranian officials. On June 24, Trump announced a “complete and total ceasefire,” but this was quickly denied by Iran’s Foreign Minister, Abbas Araghchi (Moore. 2025). Iran later clarified that it had not signed any formal agreement and would only agree to stop fighting if Israel did the same. The plan included two short pauses of 12 hours each, first from Iran, followed by Israel (Moore, 2025). While both sides expressed a desire to avoid war, they quickly accused each other of violating the truce. While it may have technically resulted in a brief de-escalation, the situation remained fragile and unresolved. 

Despite the confusion surrounding the conflict, markets reacted as if tensions were easing. Oil prices, which had surged due to concerns about fighting near the Strait of Hormuz, which is a crucial route for global oil trade, dropped sharply. U.S. crude (WTI) fell by 3.2% to $66.30 per barrel, while Brent crude declined by 3.4% to $69.08 on Tuesday (Tan & Redmond, 2025). This decrease helped ease worries about rising energy costs and inflation.

Meanwhile, U.S. stock markets rose, with the S&P 500, Nasdaq, and Dow increasing by 0.87%, 1.10%, and 0.76%, respectively (Tan & Redmond, 2025). Investors interpreted the ceasefire – whether real or not – as a reason to feel more optimistic. However, this reaction reflects sentiment more than substance. Since Iran never agreed to a formal ceasefire, and military exchanges continued shortly after, the market’s optimism may be premature.  

Looking ahead, this temporary relief does not eliminate the underlying risks. The Strait of Hormuz continues to be a significant geopolitical flashpoint, and any renewed escalation could cause oil prices to rise. Some analysts, including those at Goldman Sachs, have warned that if tensions escalate and the Strait of Hormuz is disrupted, oil prices could quickly surpass $100 per barrel again (Wearden, 2025).

Overall, the market appears to have undervalued the potential for further conflict in the region. Traders and businesses should remain cautious; this is not a peace deal but rather a pause in the headlines. If hostilities resume or if shipping lanes are threatened again, we can expect significant fluctuations not only in oil prices but also across currency and equity markets. The key takeaway is this: do not let temporary silence mask long-term instability.  

Fed’s Barkin: Tariffs Are Likely to Raise Prices  

On June 26, Thomas Barkin, the President of the Richmond Federal Reserve, warned that the latest round of U.S. tariffs is likely to increase consumer prices (Derby, 2025). While earlier tariffs had a limited impact on inflation, Barkin pointed out that businesses are now more prepared to pass the additional import costs onto customers. This shift could result in higher prices for everyday goods, particularly imports such as electronics, vehicles, and apparel. However, Barkin noted that there are indications consumers will attempt to avoid goods subject to tariffs. Although he does not anticipate a massive inflation spike like that experienced during the COVID-19 pandemic, Barkin stated that the inflationary effects this time are “very likely” and could begin to emerge in the coming months.  

Despite these risks, the Federal Reserve is not rushing to change interest rates. Currently, the Fed is maintaining rates at 4.25% to 4.50% and is adopting a “wait and see” strategy (Derby, 2025). Barkin described the U.S. economy as generally strong, noting solid job growth and a slowdown in inflation from its peak. However, he emphasized that the Fed is closely monitoring the situation and is prepared to “address whatever the economy will require.” This warning carries weight: the Fed may increase rates if necessary. This is significant because higher interest rates make borrowing more expensive for individuals and businesses, but they are also employed to help control price increases. If tariffs lead to another surge in inflation, the possibility of rate cuts could be postponed or even reversed.  

For consumers, this warning indicates that prices for imported goods such as electronics, cars, and clothing may increase. As a result, consumers could lose their purchasing power and shift demand toward domestic substitutes. Businesses, particularly those that depend on global supply chains, might face higher costs for materials and inventory, which could impact on their profit margins. Likewise, households and firms may face tighter credit conditions and more expensive loans if rates increase. The likelihood of a rate cut in July appears lower, as most analysts are now predicting a potential shift in September, if inflation data remains stable (Derby, 2025). 

Some Federal Reserve officials, including Governor Christopher Waller and Federal Reserve Vice Chair for Supervision Michelle Bowman, remain optimistic and prefer to cut interest rates sooner (Zilber, 2025). However, Barkin’s remarks highlight that there is ongoing caution inside the Fed. The possibility of renewed inflation, driven not by demand but by policy-induced cost pressures, adds a layer of complexity to the Fed’s policy path. Unless inflation shows clear signs of slowing, rate cuts may be delayed deeper into the year, keeping uncertainty elevated for both markets and borrowers. For now, it is wise to stay cautious, monitor inflation data, and be prepared for delayed rate cuts, which seems to be the most realistic outlook for the summer.  

Dollar Drops on Fears of Political Interference in Fed Policy  

On June 26, the U.S. dollar fell sharply, extending its decline to over 10% for the year and reaching its lowest level in more than three years (Partridge, 2025). This sharp drop marked the worst six-month performance for the dollar since the early 1970s (Oguh & Jones, 2025). The decline was largely driven by increasing concerns about the independence of the Federal Reserve. These concerns intensified when former President Donald Trump publicly criticized Fed Chair Jerome Powell, calling him “terrible,” and suggested that Powell might be replaced before his term ends in May 2026 (Partridge, 2025).

Investors interpreted these remarks as a signal that the Fed could come under political pressure to cut rates more aggressively than intended. As a result, expectations quickly shifted: investors began pricing 125 to 175 basis points of rate cuts by early 2026 – well above the Fed’s official projections (McGeever, 2025). This widening gap between market expectations and the Fed’s stated outlook was a key factor in the weakening of the dollar. The weaker dollar had an immediate impact on global financial markets.  

Equity indexes such as the Nasdaq 100, the S&P 500, and MSCI’s world index all reached record highs, with under 1% increase, as investors anticipated looser monetary policy and cheaper borrowing conditions (Oguh & Jones, 2025). The euro rose to its strongest level since late 2021, while the Swiss franc and Japanese yen also appreciated sharply. The U.S. dollar, by contrast, became the weakest major currency since March 2022. These reactions reflect not only expectations of rate cuts but also deeper investor unease about institutional credibility.

The prospect of political influence over monetary policy undermines confidence in the Fed’s long-term decision-making. While many traders positioned themselves to benefit from a continued decline of the dollar by investing in tech stocks, buying gold, or betting against the dollar, some analysts have issued warnings about the risks of “pain trades” (McGeever, 2025). These occur when investors overextend their positions based on assumptions that later prove incorrect, especially if the Federal Reserve ultimately maintains its current policy stance despite external pressures.  

The implications of a weakening dollar are wide-ranging. For consumers and travelers, a weaker dollar may result in higher prices for imported goods and more costly travel abroad, putting pressure on household budgets. For exporters, the weaker dollar provides a competitive advantage, potentially boosting overseas sales. Importers, on the other hand, may face rising costs that could squeeze margins or fuel domestic inflation. Financial markets may continue to benefit from easing expectations, but that optimism rests on a fragile foundation. If the Fed reaffirms its independence and delays rate cuts, investors may need to rapidly scale back risk-heavy positions. In this context, the dollar fall is not just a currency event but a reflection of market anxiety about the balance of power between politics and central banking. Until that uncertainty is resolved, volatility in currencies, rates, and equities is likely to persist.  

References  

Derby, M. S. (2025, June 26). Fed’s Barkin says tariffs will start pushing up inflation. Reuters. Retrieved June 26, 2025, from https://www.reuters.com/business/feds-barkin-says-tariffs- will-start-pushing-up-inflation-2025-06-26/  

McGeever, J. (2025, June 26). Trading Day: Markets ‘run it hot’. Reuters. Retrieved June 26, 2025, from https://www.reuters.com/world/china/global-markets-trading-day-2025-06- 26/  

Moore, J. (2025, June 24). Israel and Iran agree to ceasefire to bring end to “12 DAY WAR,” Trump says. ABC News. Retrieved June 26, 2025, from https://abcnews.go.com/International/israel-iran-agree-ceasefire-bring-end-12- day/story?id=123137697  

Oguh, C., & Jones, M. (2025, June 26). Stocks hit fresh record, dollar weakens to lowest in three years amid Fed worries.Reuters. Retrieved June 26, 2025, from https://www.reuters.com/world/china/global-markets-wrapup-1-2025-06-26/  

Partridge, J. (2025, June 26). US dollar falls to three‐year low after report Trump may name next Fed chair early. The Guardian. Retrieved June 26, 2025, from https://www.theguardian.com/business/2025/jun/26/us-dollar-falls-to-three-year-low- after-report-trump-may-name-next-fed-chair-early  

Tan, H., & Redmond, N. (2025, June 24). Oil prices tumble and stock futures rise on Iran and Israel cease‐fire news.Business Insider. Retrieved June 26, 2025, from https://markets.businessinsider.com/news/commodities/oil-price-sp500-futures-trump- announces-israel-iran-ceasefire-hormuz-2025-6  

Wearden, G. (2025, June 23). Goldman Sachs warns Brent crude could hit $100 per barrel if Strait of Hormuz is disrupted; oil dips as Trump demands lower prices – as it happened.  

The Guardian. Retrieved June 26, 2025, from https://www.theguardian.com/business/live/2025/jun/23/oil-price-imf-iran-strikes-stock-markets-business-live-news-updates  

Zilber, A. (2025, June 23). Fed’s Bowman backs July rate cut citing weak inflation and fragile labor market. New York Post. Retrieved June 26, 2025, from https://nypost.com/2025/06/23/business/feds-bowman-backs-july-rate-cut-citing-weak- inflation-labor-fragility/