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South African assets have rallied strongly as growing optimism over a potential end to the conflict in Iran sent oil prices tumbling and pushed local bond yields to their lowest levels since the start of the war.While local markets were closed for the Youth Day public holiday, the momentum continued yesterday, with the rand firming for a second straight day while South Africa’s blended 10-year bond saw its yield fall for a fifth consecutive session.Meanwhile, confusion reigned over the actual implications of US President Donald Trump’s announcement on Monday that a preliminary agreement had been signed by both parties, with analysts warning that even if the ceasefire holds shipping and energy exports could take weeks to recover.Speaking at the G7 meetings in France, Trump said on Tuesday that the text of the deal, which extends the tenuous ceasefire announced in April by another 60 days and ostensibly reopens the Strait of Hormuz, also states clearly that Tehran will not have a nuclear weapon. However, negotiators are only set to address difficult issues such as the future of Iran’s nuclear programme during the next phase of talks, which Iranian foreign minister Abbas Araqchi said would start in Switzerland on Friday after the formal signing of the framework deal. Trump said the full text of the agreement will be made public in a formal setting in the next few days.Meanwhile, the rate at which the South African government borrows has dropped to 8.34% after peaking at 9.27% a month into the conflict. Just a few days before the first bombs dropped the yield reached as low as 7.9%.The rand has strengthened about 1% over the past two days, reaching a level last seen just three days into the war in early March. On Monday it was trading at a best rate of R16.13/$.Gold has also gained while oil prices have plummeted — the former due to its safe haven status and the latter in the hope that supply disruptions will soon end.Lower oil prices mean lower inflation and after the Reserve Bank raised interest rates last month due to the knock-on effects of the war, this trend could begin to be reversed if a peace deal holds.Two of the issues that Trump and Israeli Prime Minister Benjamin Netanyahu used to justify the war ― ending Iran’s support for regional armed proxies and curbing its missile programme ― are not thought to be on the agenda for the upcoming negotiations.“Iran wants to get it done,” Trump told reporters about the next phase of negotiations with the country. “They have to get back to business, and the relationship is now normalised, so I think it’s going to go pretty quickly.” Earlier he described the deal as “a wall to a nuclear weapon” for Iran. Iranian President Masoud Pezeshkian posted on social media on Monday that the interim agreement was an “important step” toward stopping the fighting, but noted that a final deal for a lasting truce “has yet to take shape”. US vice-president JD Vance told CNN that the signed memorandum was a “very general document”.Both sides still face pressures after a conflict that has killed at least 7,000 people, mostly in Iran and Lebanon, and upended global energy markets. The accord exposes Trump to criticism from within his own party, while Iran’s leaders could face the risk of renewed protests if they fail to alleviate economic pressures after a destructive war. US and Iranian officials say the deal could eventually deliver substantial economic benefits to Iran by lifting sanctions and unfreezing foreign assets. It could also set up a $300bn reconstruction fund, paid for by neighbouring Gulf states that host US military bases and were hit by Iranian attacks during the war.US officials, speaking on condition of anonymity, said Iran would have to satisfy US demands never to build a nuclear weapon and cut off support for militias such as Hezbollah in Lebanon to get those benefits. Iranian officials, who have always denied intending to build a nuclear weapon, said they have given up little by agreeing to resume diplomatic discussions over Iran’s uranium enrichment programme that were interrupted by the war.Both sides said the Strait of Hormuz, which normally carries about a fifth of the world’s trade in oil and liquefied natural gas, will be open from Friday. On Tuesday, Iranian state television reported operations to lift its maritime blockade, while stressing that vessels must still co-ordinate with Iran’s Revolutionary Guards.Trump said earlier that tankers were starting to move out of the strait and Reuters reported that the US, which had imposed its own blockade on Iranian ports, had been overseeing scores of secretive ship-to-ship oil transfers to keep Gulf energy exports flowing.The US said the strait will be open toll-free for 60 days and it would expect that provision to be part of a final agreement. Iran has suggested it will retain control with Oman over the strait.Shippers said a return to normal traffic will be gradual. One concern is the possible presence of mines in the narrow waterway between Iran and Oman. A thorough minesweeping operation would “take weeks to months”, an official with Greek maritime security company Diaplous said on Tuesday.The conflict between US ally Israel and the Iran-allied Hezbollah militia in Lebanon, which has uprooted 1.2-million people, remains another complication. Iran has said the deal requires a full cessation of hostilities there, but Netanyahu said Israel would keep its forces in southern Lebanon and retain the right to respond to Hezbollah attacks.Trump has expressed frustration at Israel’s military campaign, saying on Tuesday he is “not happy” with the way Israel has handled itself. Israel has not directly participated in the peace talks with Iran. A US official said an Israeli withdrawal from Lebanon, which it invaded in March after Hezbollah joined the war, was not a condition of the deal.
