Stocks rallied sharply as volatility was crushed after news of a deal between the U.S. and Iran eased tensions in the Middle East and allowed oil prices to fall. According to reports from Investing.com India, the VIX 1-Day closed around 19 on Friday and traded down to 13.5 on Monday, while the VIX Index fell to 16. As reported, volatility has largely reset, and with much of that repricing now behind us, the biggest gains in the index are likely already in the rearview mirror.
The dollar index (DXY) slid to a 1-week low today and is down -0.30%, coming under pressure after stocks rallied sharply following the US and Iran's announcement of a deal to end the war. According to latest reports, the dollar weakness was driven by weaker-than-expected US economic reports, including the Jun Empire manufacturing survey falling to 5.7 from expectations of 13.7, and May manufacturing production remaining unchanged m/m instead of the expected +0.3% m/m. The EUR/USD climbed to a 1-week high, up +0.39%, while USD/JPY is down by -0.10% as the yen benefits from expectations of BOJ rate hikes at Tuesday's policy meeting.
The Ibex 35 emerged as one of the standout performers in European markets, smashing through all resistance levels to reach 19,122 points and breaking through the 19,000-point barrier for the first time. According to euronews, this represents a gain of around 10% since the start of the year. The Spanish stock market opened as one of the day's standout performers, with euphoria sweeping through international financial markets after the announcement of a framework agreement between the Trump administration and the Republic of Iran to end the war in the Middle East.
The agreement between the United States and Iran brings to an end the military escalation that had kept the Middle East on edge and was threatening global macroeconomic stability. The economic centrepiece of the bilateral deal is the immediate reopening of the Strait of Hormuz, a maritime corridor through which a fifth of the oil consumed worldwide is shipped. As reported, the -5% plunge in WTI crude oil to a 3-month low has lowered inflation expectations and could prompt the Fed to pursue easier monetary policy, with swaps markets discounting a 4% chance for a +25 bp rate cut at the next FOMC meeting on June 16-17. Gold and silver prices are sharply higher, with August COMEX gold up +3.56% and July COMEX silver up +4.92%.
Micron rose about 10% on the day, but more importantly, the company is set to report earnings on June 24. As reported by Investing.com India, seven-day implied volatility is now above 120%, an exceptionally high level that reflects elevated expectations for the report. The stock is also heavily skewed toward call positioning, similar to what has been seen in Broadcom and other AI-related names, suggesting investors continue to lean aggressively bullish heading into earnings.
