(The opinions expressed here are those of the author.)

By Anna Szymanski

June 19 (Reuters) -

Everything Mike Dolan and the ROI team are excited to read,

watch and listen to over the weekend.

From the Editor

Hello Morning Bid readers!

We have a deal - sort of. The week kicked off with news late on

Sunday that the U.S. and Iran had agreed on a memorandum of

understanding that would officially end hostilities and reopen

the Strait of Hormuz. Global equities cheered the news, and oil

prices tumbled, with Brent slipping below $80 a barrel this week

as it appeared tankers were starting to move through the

critical waterway.

Even a hawkish shift from the Federal Reserve during Kevin

Warsh's debut policy meeting on Wednesday was not enough to

sideline stocks for long, as the prospect of lower energy prices

buoyed investors globally. But now that the initial

U.S.-Iran peace talks have been cancelled, this optimism looks

like it may have been premature.

The MoU was signed by U.S. President Donald Trump and Iranian

President Masoud Pezeshkian on Wednesday. The 14-point plan

outlines an end to hostilities on all fronts and the resumption

of toll-free traffic through Hormuz for 60 days, during which

the more complex issues under discussion, like the future of

Iran's nuclear program, will be hammered out.

Negotiations were set to begin today in Switzerland, but

those talks were cancelled, raising questions about how quickly

this conflict can be resolved.

While no one knows exactly what the final deal will look like -

or even if we'll get a final deal - the preliminary agreement

appears to leave Iran in a relatively strong position. That

could mean more volatility ahead for oil prices.

Why? For starters, because Iran may maintain some control over

Hormuz, in coordination with Oman, after the 60-day period ends,

which could put upward pressure on prices over time. A deal that

leaves Iran emboldened could also create problems for America's

Gulf partners - meaning the deal might not be durable - giving

shippers one more reason to remain cautious about returning to

the narrow waterway.

At the same time, if the deal holds, Iranian oil could come

back onto the open market just as Gulf producers are racing to

restart facilities and ramp up production. That raises the

possibility of an oil glut moving forward, which, of course,

would put downward pressure on prices.

While crude prices rose early on Friday following news that the

peace talks in Switzerland had been scrapped, traders are apt to

wager that Trump will not backtrack on this deal. They made a

similar wager about Trump's motivations during the war - and

were proven right.

Looking forward, one of the key lessons for Gulf producers from

the conflict is that they must diversify - or else. Overreliance

on a single choke point will no longer be tenable, and we're

already seeing a race to create or expand alternative export

routes. The political, economic and strategic implications of

this could reshape the region for decades to come.

Another lesson will be the benefit of having large reserves.

China is a case in point. Its massive stockpiles enabled it to

play a key role in keeping energy markets from truly entering

crisis mode during the Hormuz shock, as it was able to reduce

imports significantly. (Interestingly, it doesn't appear to have

drawn down inventories as much as its drop in imports last month

would suggest.)

Away from the Middle East, the other big event this week was

Kevin Warsh's first policy meeting at the helm of the Federal

Reserve. The interest rate decision surprised no one - the

target range remained unchanged at 3.50-3.75% - but the

messaging out of the meeting had a notable hawkish tilt. Almost

half the members indicated that they expected a hike moving

forward, and Warsh - who eschewed a dot-plot projection of his

own - used his press conference to echo the policy statement's

emphasis on delivering price stability.

Markets initially responded negatively to the announcement,

with equities falling and Treasury yields rising. But that was

quickly tempered on Thursday, with major U.S.

indexes rebounding as the release of the MoU's terms raised the

prospect of a flood of crude entering the market, weakening

inflation pressures.

The other notable takeaway from Warsh's debut was the brevity of

the FOMC statement. It came in at a mere 130 words and didn't

include forward guidance. This suggests that we will likely have

a much less chatty Fed moving forward. Will that create more or

less volatility? That remains an open question, though there is

an argument to be made that quality trumps quantity where

central bank communication is concerned.

Warsh also announced a wide-ranging review of aspects of the

Fed's operations, including its communications, data sources and

inflation framework.

This was a busy week for central banks overall. The Bank of

Japan on Tuesday delivered an expected quarter-point rate hike

to 1%, a 31-year high. In remarks on Tuesday, BOJ Deputy

Governor Shinichi Uchida highlighted the conundrum facing

central bankers following the U.S.-Iran deal, welcoming the news

but flagging uncertainty around the "pace of improvement" on oil

flows.

Elsewhere, the Bank of England on Thursday voted 7-2 to keep

rates on hold at 3.75%. Governor Andrew Bailey was also pleased

to see an interim peace agreement in the Middle East but noted

that there was "already some inflationary pressure in the

pipeline". The BoE expects inflation to exceed 3.25% in the

final quarter, up from 2.8% in May.

Meanwhile, UK markets will be closely watching the aftermath of

an important by-election that returned Greater Manchester Mayor

Andy Burnham to Parliament - paving the way for a bid to oust

Prime Minister Keir Starmer.

Over in equities, SpaceX's torrid rise has hit a snag, with the

share price of Elon Musk's company dropping by around 5% on

Wednesday and 3.5% on Thursday - though it's still more than 30%

higher than its IPO price.

Looking to next week, there will be more data on the

inflation front, with the release on Thursday of May's U.S.

personal consumption expenditures index - the Fed's preferred

inflation gauge.

Ultimately though, what will matter more for the Fed is not

what's in that report but what happens with the fragile peace in

the Middle East.

For more data-driven insights on markets and commodities, check

out Reuters Open Interest. You can learn:

* What could be next for Europe's gas market after

it weathered the Hormuz shock?

* Are LLMs really that much better than smaller, cheaper

models - and if not, what does that mean for the AI boom?

* What could the "Dieselgate" scandal tell us about

the likely legacy of the Iran war?

* Is copper's speculative fever heating up again?

* Which industrial metal is trying to join the energy

transition boom?

* Why have foreigners been fleeing Asian equities - and will

they return?

* Why might the era of pure passive investing be over?

I'd love to hear from you, so please reach out to me at .

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Opinions expressed are those of the authors. They do not reflect

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