Wall Street futures climbed on Friday after the U.S. and Iran agreed to a temporary two-week ceasefire, but the relief rally prompted a warning from commentator Jim Cramer that investors may be getting ahead of themselves.
"Bulls need to pull in their horns a little bit," Cramer said, cautioning that the market was reacting to a fragile truce and that conditions could be overbought.
The ceasefire announcement triggered a significant cross-asset reaction as geopolitical risk premiums were unwound. Oil prices fell below $100 per barrel, providing relief from a major inflationary factor. In currency markets, the U.S. dollar index, a primary beneficiary during the crisis, fell to 98.80, its lowest in a month. Consequently, the euro rose to $1.17 and the British pound hit $1.3450. Gold, a traditional safe-haven, rose 2.3 percent.
The rally's durability, however, is in question as the truce is fraught with uncertainty. While brokered to reopen the critical Strait of Hormuz, Iranian officials stated passage would require coordination with their armed forces, a caveat analysts see as a potential point of failure. "This is a problem that could derail the ceasefire later this year," said Matt Gertken, chief geopolitical strategist at BCA Research. He warned that while President Trump may accept the terms ahead of midterm elections, the U.S. security establishment will likely demand a more permanent solution later.
The agreement, negotiated with help from Pakistan, has been characterized differently by both sides. The White House called it a U.S. victory, while Iran claimed its conditions were met. This "deep trust deficit," as described by Pratibha Thaker, a regional director at the Economist Intelligence Unit, complicates the outlook for planned negotiations in Islamabad.
Further stressing the truce, hostilities have not entirely ceased in the region. Israel, while agreeing to suspend strikes on Iran, has continued operations in Lebanon, prompting Iran's foreign minister to state on X that the U.S. "must choose—ceasefire or continued war via Israel. It cannot have both." According to Iranian state media, the Strait of Hormuz remains shut in response.
Portfolio managers are now weighing the short-term optimism against the substantial underlying risks. "There's still low visibility [and] limited predictability on whether the truce will hold," said Josh Rubin, a portfolio manager at Thornburg Investments, cautioning that tail risks remain. While the pause in conflict is a welcome development, the path to a lasting peace appears complex and uncertain, suggesting the current market rally rests on a precarious foundation.
This article is for informational purposes only and does not constitute investment advice.
