[International Financial Briefing] Trump: "The likelihood of Iran reaching an agreement is very high"... WTI plunges 7% · S&P 500 rises 1.5%

As expectations for a ceasefire negotiation between the United States and Iran heat up, international oil prices plummeted sharply, and global financial markets showed a risk-on trend.

According to a report released by the International Financial Center on the 7th, U.S. President Donald Trump stated that the likelihood of reaching an end to the war with Iran is very high, reinforcing global financial markets’ preference for risk assets. Oil prices dropped over 7%, U.S. and European stock markets rose, and while markets focus on the potential easing of tensions in the Middle East, they are also paying attention to U.S. monetary policy, China’s economic trends, and trade conflict risks.

According to the International Financial Center, although President Trump indicated a high probability of reaching an agreement with Iran, he also warned that if negotiations fail, “more intense bombing than ever before” will be launched. It is reported that the U.S. proposed a memorandum of understanding that includes: Iran halting uranium enrichment activities, the U.S. lifting sanctions on Iran and unfreezing frozen funds, and gradually lifting the blockade of the Strait of Hormuz.

U.S. media Axios reported that the U.S. and Iran are close to signing a one-page memorandum of understanding to end the war, and Iran may respond within 48 hours. However, some Iranian officials pointed out that the U.S. proposal contains unacceptable terms.

France and the UK announced that if Iran agrees to the U.S. proposal, their led maritime joint task force can escort oil tankers passing through the Strait of Hormuz. The Iranian Revolutionary Guard also stated that they will ensure the safe passage through the Strait of Hormuz under the new agreement. On the other hand, the U.S. Central Command announced that Iranian-flagged oil tankers that do not comply with transit restrictions will be shot at, causing them to lose navigation capability, adding tension to the situation.

Meanwhile, the crude oil market is experiencing concerns over supply tightness and expectations of potential price crashes. S&P Global Energy Analysis reported that global crude oil inventories decreased by 200 million barrels in April. The Financial Times warned that if inventories fall below critical levels, oil prices could surge within weeks.

In financial markets, the expectation of an end to Middle East conflict has stimulated risk appetite. The U.S. S&P 500 index rose 1.46%, driven by optimism about the ceasefire, strong corporate earnings, and semiconductor-related stocks, closing at 7,365.1 points. The European Stoxx600 index also increased by 2.22%, closing at 623.25 points. China’s Shanghai Composite rose 1.17%. South Korea’s KOSPI surged 6.45% after market close, ending at 7,384.6 points.

In the foreign exchange market, easing geopolitical risks and expectations of possible intervention by Japanese authorities led to a weakening of the dollar. The U.S. dollar index fell 0.43% to 98.02. The euro and yen appreciated by 0.47% and 0.95%, respectively. The Chinese yuan traded at 6.8125 per dollar, hitting a three-year high against the dollar. The Korean won also appreciated, with the USD/KRW exchange rate at 1,455.1 won. The one-month NY NDF close was 1,444.9 won.

In the bond market, the sharp decline in oil prices eased inflation concerns, leading to falling yields. The U.S. 10-year Treasury yield dropped 8 basis points to 4.35%, the German 10-year yield fell 6 basis points to 3.00%, and the UK 10-year yield declined 12 basis points to 4.94%. South Korea’s CDS spread was 28 basis points, slightly weakening; China’s CDS decreased by 1 basis point to 42 basis points.

In commodities, international oil prices tumbled. WTI crude oil fell 7.03% in a single day, closing at $95.08. Copper prices rose 3.26%, gold increased 2.95%, closing at $4,691.4. The VIX volatility index was 17.39, roughly unchanged from the previous trading day.

U.S. economic indicators remain solid. In April, ADP private employment increased by 109k, far exceeding March’s 61k, marking the largest increase since January 2025. Markets believe that even amid Middle East tensions, employment continues to grow steadily, weakening expectations of rate cuts this year. NerdWallet analysis states that this indicator supports the view that the Federal Reserve is unlikely to cut rates within the year.

Meanwhile, the New York Fed’s April Global Supply Chain Pressure Index (GSCPI) rose to 1.82, the highest since July 2022, indicating that the Middle East conflict has significantly worsened the global logistics environment.

Federal Reserve officials continue to emphasize concerns about prices. St. Louis Fed President James Bullard said that inflation is more worrying than employment, implying that rates may remain unchanged in the short term. He believes that demand-driven factors such as AI investment expansion and deregulation have a greater impact than tariffs and rising energy prices. Chicago Fed President Goolsbee also pointed out that a surge in productivity-enhancing investments could push inflation higher.

At the national level, supply chain and trade issues are also under focus. G7 trade ministers discussed ensuring the security of critical mineral supply chains and expressed caution over monopolistic control by certain countries. This is interpreted as reflecting concerns over China’s dominant position. Larry Fink, Chairman of BlackRock, said that AI infrastructure investment is not a bubble but a “once-in-a-century investment opportunity,” citing shortages in storage chips, electricity, and computing power.

In Europe, concerns over trade conflicts and economic slowdown are emerging simultaneously. EU Commission Vice President Šefčovič urged the U.S. to honor the trade agreement signed last year. This is seen as a response to President Trump’s threat to increase tariffs on European auto imports. The Eurozone’s April HCOB Services PMI final reading was 47.6, a sharp decline from 50.2 in March, marking a 2-month low, mainly due to weak new orders.

In China, the improvement in service sector activity coincides with a strengthening yuan. The Caixin Services PMI for April was 52.6, up from 52.1 in March. Despite a slowdown in new export orders, domestic service activity increased, and rising energy prices significantly increased input costs. Markets believe that active holiday consumption and steady domestic demand underpin the yuan’s strength.

Foreign media also analyzed the background and potential risks of the strong U.S. stock market. Reuters reported that S&P 500 companies’ first-quarter profits are expected to reach their highest level since Q4 2021. The expansion of AI investments and a resilient economy are seen as supporting improved corporate earnings, with the five largest AI super-large companies’ data center investments projected to approach $751 billion this year. However, risks include rising inflation, cooling expectations for rate cuts, high oil prices, and the possibility of prolonged Middle East conflict.

The Financial Times commented that U.S. actions toward Iran resemble applying post-WWII reconstruction models to the Middle East but may be ineffective. Some analysts noted that unlike defeated countries, Iran did not initiate the war, and considering religious and regional complexities, the broad reconstruction model led by the U.S. has limitations.

The Wall Street Journal analyzed that President Trump’s threat to impose 25% tariffs on European cars and trucks demonstrates his firm stance on trade policy. The paper also suggests that U.S. trade partners like South Korea may face additional tariff risks.

Bloomberg evaluated that Federal Reserve Chair Jerome Powell’s decision to retain his board seat after his term ends is a legitimate move to defend the Fed’s independence. The report also warns that political interference in monetary policy could trigger inflation risks and undermine credibility.

Additionally, The New York Times commented that while President Trump seeks a solution to end Middle East conflicts, he lacks a substantive exit strategy. Bloomberg noted that rising U.S. gasoline prices burden low-income groups and reinforce “K-shaped” consumption. The Wall Street Journal pointed out that U.S. public debt has reached dangerous levels. Reuters suggested that frequent interventions by Japanese authorities in the forex market could actually trigger yen depreciation. The Financial Times forecasted that increased oil price volatility might reduce global commodity flows and slow trade. The FT also believes that global economic imbalances are once again becoming a core issue for the world economy.