The conflict continues to rage, but both sides appear to be on the verge of signing some form of framework agreement or memorandum of understanding (MOU).
While the deal is being broadly described as an effort to "end the conflict," it is important to understand what is actually at stake. The framework agreement or MOU is primarily intended to set out new terms for how the conflict will proceed going forward — not to resolve it outright.
Its main purpose is to facilitate a more peaceful transition as both parties move on to nuclear discussions. The timeline for this arrangement is expected to span roughly two months, or 60 days.
If no breakthrough is achieved within that window, the situation could revert to where it stood before the agreement. Alternatively, both sides may opt to keep the status quo by extending the timeline further.
A critical risk is that this transition could still break down entirely. One key sticking point is Iran's control over the Strait of Hormuz — a concession Tehran is highly unlikely to make, as it represents the country's most significant leverage in negotiations.
"I don't see how Iran will ever agree to that as this remains their biggest leverage in negotiations. However, what I feel might happen is that Iran will show some gesture of goodwill in clearing out some mines and allow a conditional reopening — one that they will still be in charge and manage."
That appears to be the direction both sides are leaning, based on the latest developments. As a result, markets are pulling back from earlier optimism and adopting a more cautious stance.
A concern is that market participants may have priced in an overly optimistic outcome in recent weeks, anticipating significant change in the Middle East. When the formal announcement comes — expected sometime this week — there is a real possibility of a classic "buy the rumor, sell the fact" reaction.
That scenario seems plausible given that whatever is announced will likely amount to little more than pressing pause on the conflict and extending it for another two months, with only a modest improvement in traffic flow through the Strait of Hormuz.
In Tuesday's session, European futures are pointing lower, giving back some of Monday's gains. DAX futures are down 0.3%, while CAC 40 futures are off 0.2%.
S&P 500 futures are also pulling back slightly from yesterday's highs ahead of Wall Street's return later in the day.
Oil prices remain under pressure, though the sharp decline appears to have stabilized. WTI crude is trading at $91.95, well above the overnight low of $89.40.
Treasury yields have also recovered somewhat. The 10-year yield is sitting at 4.51%, up from an earlier low of 4.49%.
Precious metals have retreated as well, with gold down 0.9% to $4,530.
Why it matters
The agreement being discussed is not a resolution — it is a framework that sets new terms for how the conflict continues, meaning underlying tensions remain active even if fighting pauses.
Iran's control of the Strait of Hormuz is a critical factor: even a conditional reopening managed by Iran leaves supply-route risk intact, since Tehran retains operational authority over the waterway.
The 60-day window creates a defined period of structural uncertainty — if no breakthrough is reached, the situation could revert to pre-agreement conditions, as the original article explicitly notes.
