Party Time for Stocks… But the Inflation Risk Remains

The war is over.

A peace deal between the United States and Iran was finally struck over the weekend, giving markets every reason to rip higher.

Nicely timed for the World Cup celebrations.

Not to mention Trump’s former buddy, Elon Musk, as he launches the largest IPO in market history.

Is it a coincidence that all these events are happening all at once? Nope.

Get ready for the official signing ceremony on Friday, 19 June. That’s going to set the stage for some serious chest-beating in Washington.

So, was all this a surprise?

Probably not; energy markets were already positioning for this peace deal. Oil fell more than 4% to $84 a barrel on Friday, hitting an eight-week low.

And we can probably expect further falls IF this deal gets cemented over the coming days.

No doubt, this will shift investor sentiment from bullish to hyper-bullish over the coming weeks. A trader’s delight.

Party time for Stocks; less so for Oil

No doubt, there’s going to be a good deal of celebration across global markets this week, particularly among the regions most exposed to oil supply, like Southeast Asia.

Who knows how far this ‘peace rally’ will run, a few days, perhaps it could even last a few months?

But a few words of caution…

Even with a peace deal on the table, the inflationary picture has not fundamentally shifted.

Earlier this month, the US May jobs report announced a ‘shock’ 172,000 new jobs to the register, more than double the consensus forecast of 85,000.

So, just a reminder of what happened a little over a week ago…

That strong jobs number killed expectations of a US rate cut; it was the primary catalyst for a 4% drop on the Nasdaq, the largest fall since the tariff blow in April 2025.

While it may seem like old news now, it’s a reminder of the underlying inflationary risks that remain.

Then there’s the oil angle…

According to a few oil analysts I follow, the expectation is that it will still take at least 3-6 months before Iranian oil production and global supply chains return to anything resembling normal.

Until that happens, global oil supply will remain competitive, and prices will stay elevated.

But remember too, these positive tailwinds can only happen if the Strait of Hormuz fully reopens on schedule and perhaps more critically… If this deal actually holds up.

Let’s see, but I’m not ready to hit the sell button on our long-term oil positions just yet.

Another Risk: Oil Hoarding

A feature that often follows a major oil crisis is a pivot towards preventing future crises.

What do I mean?

When a country gets shaken by a near-catastrophic supply disruption, it tends to shift the national mindset.

For a long time, the flow of cheap, abundant oil hasn’t given nations any real impetus to develop contingency plans for their energy supply.

But that’s now changed.

Here’s a historical example of how it might look: Oil prices remained elevated years after OPEC ended its oil embargoes against the West in the early 1970s.

The magnitude of that oil crisis caused oil-importing nations to adopt emergency plans in the event of future supply shocks.

In fact, the US established its Strategic Petroleum Reserve (SPR) in 1975, shortly after the devastating 1973 OPEC oil embargo. And began filling those reserves shortly thereafter.

Bottom line: regardless of the end of this war, the paranoia about future oil supply is probably just getting started.

What do I mean?

Over the coming months, there’ll be a big focus towards refilling strategic reserves. A deep drawdown of these reserves in recent weeks prevented a major energy crisis from unfolding in 2026.

But it could go much further than that…

No doubt, nations will look to other strategies to mitigate future energy shocks. Renewables could be part of that answer.

But so will traditional energy.

This is the setup that can really start to favour oil and gas service stocks, the companies tasked with developing and finding new reserves.

These stocks will benefit the most as countries invest more towards developing their own supplies to build a more permanent layer of resilience.

They’re exactly the types of stocks I’ll be targeting if we see a meaningful sell-off across the O&G sector over the coming weeks.

Get ready!

I’ve suggested a couple of names for my paid readership group; you can check them out here.

Until next time.