Qatari Mediators Hand New Draft to Iran; Response Due by Week's End

An official familiar with the US-Iran negotiations said that on Sunday, Qatari mediators handed a new draft proposal to Tehran. Iran is reviewing the proposal, and a response is anticipated before the week concludes. According to reports, the draft sets out a seven-day framework to address both sides' issues, mandating daily trust-building actions that could start as early as next week.

This update follows the previous day's report that Iran's army chief met with Supreme Leader Khamenei. Khamenei reportedly underscored the need to safeguard Iran's interests and secure its terms for ending the war and the current deadlock. Markets are so eager for positive news that any headline hinting at a deal triggers risk-on moves, with hopes pinned on an agreement before the US midterm election.

Clearly, a deal would prompt a strong rally in risk assets on improved growth expectations and easing inflation worries. Crude oil would be hardest hit, with a swift and sharp decline expected. Equities could quickly hit new record highs, while precious metals might erase most of their recent months' losses.

Bear in mind that these reports do not confirm a deal is near; they are simply updates on the latest developments. The market is extrapolating positive signals purely on expectations of a potential deal ahead of the midterms. The reports also arrived when positioning was somewhat stretched, leading to relief rallies. For a sustained move, more concrete evidence would be needed.