A Reuters report cited a source with knowledge of ceasefire proposals between the United States and Iran. The source said the two sides are discussing a two-tier arrangement.
The plan would require agreement by Monday and would aim to end hostilities in the Middle East. If agreed, it would trigger an immediate ceasefire.
The source said the ceasefire stage would include reopening the Strait of Hormuz. A final agreement would follow in 15–20 days.
The proposal for the final agreement would involve Iran foregoing nuclear weapons. In return, Iran would receive sanctions relief and the release of frozen assets.
Separately, Pakistan’s army chief held calls with US Vice President JD Vance, US Special Envoy Steve Witkoff, and Iran’s Foreign Minister Abbas Araghchi. These calls were reported in connection with the same set of discussions.
In markets, there was no immediate move in the US dollar after the report. At the time of writing, the US Dollar Index (DXY) was marginally lower at about 100.12.
We are reminded of the market’s sensitivity to Middle East headlines, just as we saw with the proposed two-tier deal back in 2025. With Brent crude futures recently testing the $95 level last week on renewed tensions, any hint of de-escalation could sharply reverse this trend. Derivative traders should therefore consider positioning for a drop in oil prices, perhaps through buying put options on crude oil ETFs, as a sudden peace premium would quickly be priced out of the market.
Volatility is another key area to watch, as geopolitical risk is a primary driver. The VIX has been hovering above its long-term average, closing at 19.5 on Friday, reflecting ongoing market uncertainty. If any credible peace rumors similar to the ones from last year emerge, we should anticipate a significant drop in implied volatility, making the selling of VIX futures or call options a viable strategy for the coming weeks.
This type of de-escalation would be broadly positive for equities by lowering energy input costs and boosting investor confidence. We only have to look back to the initial market shock after the invasion of Ukraine in 2022, followed by the recovery, to see how sensitive markets are to geopolitical energy risks. Consequently, being prepared to buy call options on broad market indices like the S&P 500 would allow traders to capitalize on a potential relief rally.
While the original news from 2025 showed little immediate dollar impact, a confirmed deal would likely weaken the US dollar. A reduction in global risk lessens the appeal of the dollar as a safe-haven currency, a dynamic that has pushed the US Dollar Index (DXY) to 105.8 this quarter amid concerns over European economic data. We should therefore watch for opportunities to short the dollar against commodity-importing currencies, such as the Japanese Yen, if peace talks gain traction.
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