08 April 2026
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The US and Iran have agreed to a two-week ceasefire, mediated by Pakistan, requiring Iran to reopen the Strait of Hormuz for commercial shipping; Israel supports the pause, but its conflict with Hezbollah is excluded.
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The ceasefire, described by President Trump as a “double-sided ceasefire” and a “total and complete victory”, is seen as a step towards negotiations, though uncertainty remains over its durability and economic impact.
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While markets have rallied and recession risks have eased, lasting supply-side damage and inflationary pressures remains likely, with the risk of renewed escalation as the deadline approaches.
Based on widespread reporting, the current situation is as follows:
US and Iran agree to a two-week ceasefire, mediated by Pakistan, with immediate effect: Iran is required to reopen the Strait of Hormuz for safe commercial shipping while the US and Iran suspend all attacks. Israel supports the pause, though its conflict with Hezbollah remains outside the deal.
Key terms focus on de-escalation and the strait. Iran’s armed forces are to coordinate safe passage, with possible technical limitations and regulated access. Some reports suggest Iran and Oman will introduce transit fees for passage through the strait. The pause is temporary, paving the way for negotiations in Islamabad starting Friday, based on a 10- point proposal offered by Iran.
President Trump has described the arrangement as a “double-sided ceasefire” and “total and complete victory”. Trump claims Iran’s plan is a workable basis for talks, with most contentious points already agreed, and time allowed to finalise a long-term peace agreement.
Iran’s Supreme National Security Council and Foreign Minister accept the deal, framing it as a strategic win. The council stresses the war is not over and military readiness remains. Iran’s Foreign Minister has highlighted proposed plan details including US non-aggression, sanctions relief, enrichment acceptance, regional withdrawal, compensation, and control over the strait as a near-total achievement of war aims.
Initial thoughts:
Although no ships appear to be passing through the Strait of Hormuz yet, we can probably expect a gradual build-up of traffic over the coming days once complications around logistics and insurance cover are resolved.
It remains uncertain whether the ceasefire will hold, but it is a positive sign that both sides are busy presenting it as a victory to their domestic audiences. However, the unpredictability of both Iran and President Trump adds uncertainty and risk.
The ceasefire arrives at a critical moment – just before our best estimate that we had about six weeks from the start of the conflict before genuine shortages would hit Europe - reducing recession risks appreciably.
Even if this truce marks the genuine end of fighting, some economic damage is already baked in – expect higher inflation in the second half of the year and slower growth for major parts of the global economy compared to the pre-war outlook.
Significant damage to regional infrastructure as well as energy production and manufacturing capacity means some lasting supply-side damage that will only be gradually recovered.
Equities are up strongly while energy prices have slumped. Meanwhile, government bonds are rallying as inflation worries fade and markets begin to abandon bets on further central bank rate hikes.
Risk watch: more US forces are due to arrive in the region just as the two-week deadline approaches, while the pause gives Iran time to reorganise and re-arm. Markets may rally in the short term but could then turn fearful over the prospect of a binary outcome: either lasting peace or a major escalation.
View the full forecast.
