Iran rejects US claim of open Strait of Hormuz

Lallalit Srijandorn FXStreet

Iran rejects US Treasury Secretary Scott Bessent's and US President Donald Trump's claim that the Strait of Hormuz will open tomorrow under a new deal, Fars news agency reported on Tuesday.

Tehran insisted that its ongoing negotiations with Oman are not being held with US participation and aimed at establishing an "intermediate corridor" that will halt both the current Iran-controlled northern and US-backed southern routes.

An Iranian official said, "Trump has violated his commitments, and Iran is moving forward with its plan to establish arrangements in the Strait independently of US threats, and it will succeed," adding, "Iran does not shape its interests and priorities based on schedule or demands of Trump."

Earlier Tuesday, US Secretary of State Marco Rubio said there has been progress made in discussions with Iran and Oman on ‌getting ‌more ships through ‌the Strait of Hormuz but no final deal has been achieved, per the Guardian. “There’s been progress made in those talks, but not finality yet. We’re hoping that will happen very shortly,” said Rubio.

Furthermore, US Treasury Secretary Scott Bessent stated early Tuesday that Washington could reach a deal with Tehran by tomorrow to reopen the critical waterway.

Qatar’s foreign ministry said that efforts to resolve the US-Iran conflict are “in very progressive stages,” but that there are no direct talks between the two sides.

Market reaction

At the time of writing, the West Texas Intermediate (WTI) is up 0.31% on the day at $74.60.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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