Key Takeaways
- US and Iran are reportedly moving to sign a war termination Memorandum of Understanding (MOU) as early as Wednesday, potentially reopening the Strait of Hormuz and extending a ceasefire by 60 days.
- Federal Reserve Chair Kevin Warsh concludes his first policy meeting today; markets widely expect rates to remain at 3.50%–3.75%, but watch for a "regime change" in communication.
- US crude oil inventories plunged by 17.2 million barrels last week to 758.5 million barrels, the lowest total level (including SPR) since March 1985.
- Intel (INTC) has seen its price-to-sales ratio skyrocket from under 2x to over 11x in a year, reflecting aggressive market expectations for its foundry turnaround.
- G7 leaders in Evian-les-Bains have signaled a shift in approach toward Ukraine, with French President Macron noting that President Trump acknowledged Russia's lack of willingness for peace.
Geopolitical Breakthrough: US-Iran MOU Signing Imminent
The United States and Iran are in active discussions to move up the signing of a landmark Memorandum of Understanding (MOU) to as early as Wednesday. According to reports from Axios, the deal would likely be signed electronically, with the U.S. expected to release the full text shortly thereafter. The primary goal of the accelerated timeline is to facilitate the reopening of the Strait of Hormuz, a critical global energy chokepoint, sooner than initially planned.
While the deal aims to extend a current ceasefire for 60 days, U.S. officials, including CIA's John Ratcliffe, remain skeptical of Tehran's long-term intentions regarding nuclear concessions. President Trump has described the MOU as "pretty detailed" and a "wall to a nuclear weapon," though he cautioned that the process would restart if Iran fails to comply. Meanwhile, Italy has already announced plans to re-open its embassy in Tehran this Friday, signaling a broader European diplomatic shift.
Monetary Policy: The "Warsh Era" Begins at the Fed
Kevin Warsh is presiding over his first Federal Open Market Committee (FOMC) meeting as Chair, with a decision due this afternoon. While a rate hold is priced in by over 97% of traders, the focus is entirely on Warsh’s first press conference at 2:30 p.m. ET. Investors are looking for clues on his "framework for managing rates," as he faces conflicting pressure from a bond market wary of inflation and a president vocal about wanting cuts.
Analysts expect Warsh may begin dismantling traditional Fed communication tools, such as the "dot plot" and frequent forward guidance. Morningstar reports that Warsh is expected to rely less on internal models and more on real-time market signals. Any signal of an "eagerness to cut" could risk spooking the bond market and driving up long-term yields, which are currently hovering around 4.46% for the 10-year Treasury.
Energy and Commodities: Inventories Hit 40-Year Lows
The Energy Information Administration (EIA) reported a massive draw in U.S. crude stocks, which fell by 8.3 million barrels commercially and 17.2 million barrels when including the Strategic Petroleum Reserve (SPR). This brings total U.S. holdings to their lowest point since 1985. Stocks at the Cushing, Oklahoma hub also fell to critical operational lows of roughly 20 million barrels, the lowest since 2014.
In response to these supply shocks, Japanese Prime Minister Sanae Takaichi proposed a "Joint Stockpiling Cooperation Initiative" for critical minerals at the G7 Summit. The proposal, which was included in the final G7 outcome document, aims to counter China's dominance in the supply chain. The G7 also agreed to cooperate on the joint stockpiling of minerals like rare earths to ensure long-term industrial resilience.
Corporate and Trade: Intel Valuation and US-India Relations
Intel (INTC) continues to be a focal point for tech investors as its valuation reaches levels not seen in decades. The company's price-to-sales ratio has jumped to approximately 11.95x, up from under 2x just twelve months ago. While the company’s 18A process roadmap has shown progress, some analysts at Bernstein suggest the stock may now be "fully valued," with a forward P/E ratio exceeding 150x.
On the trade front, President Trump met with Indian Prime Minister Narendra Modi at the G7, declaring that a bilateral trade deal is "very close." Trump praised India's significant investments in the U.S. and reaffirmed that the U.S. would assist India if it were attacked. The two leaders are reportedly resolving the final "1%" of trade issues, which could significantly impact the defense and energy sectors.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.