Several outlets reported on Friday, citing Iranian sources, that Iran sent a new proposal aimed at ending the war. The reports said this also served as Iran’s response to US amendments, passed via Pakistani mediators on Thursday.
After the headline, the US Dollar weakened against other currencies. At the time of publication, the USD Index was down 0.23% at 97.88.
Market Reaction Overview
US stock index futures were mixed. S&P 500 Futures rose 0.15%, while Nasdaq Futures fell about 0.2%.
Given the new proposal from Iran, we are seeing a classic “risk-on” signal that could define market dynamics for the next several weeks. The initial weakening of the U.S. dollar is a key indicator that traders are moving away from safe-haven assets. This suggests a potential decline in implied volatility across major asset classes.
We believe the most direct trade is to anticipate a drop in the CBOE Volatility Index (VIX). With the VIX having hovered around 17 in late April, a successful diplomatic resolution could push it toward the year-to-date low of 14. Traders should consider selling out-of-the-money call options on the VIX or purchasing put option spreads to capitalize on this expected calming of markets.
For equity markets, fading geopolitical risk is a clear tailwind, especially for the broader S&P 500. The positive reaction in S&P futures signals that a sustained rally is possible if a deal appears likely. We recommend buying near-term call options on the SPY exchange-traded fund to gain leveraged exposure to this potential upside.
Energy Market Implications
The most significant impact, however, will likely be in the energy sector. A formal agreement could see an additional 1.5 million barrels of Iranian oil per day return to the global market, according to recent International Energy Agency estimates. This supply increase would put significant downward pressure on crude oil prices, making long-dated put options on WTI crude futures or the USO oil fund an attractive hedge.
In the currency markets, we should expect continued weakness for the U.S. dollar as its safe-haven appeal diminishes. We saw a similar dynamic in the second half of 2025 when initial talks between the two nations began to gain traction. Therefore, buying put options on the Invesco DB USD Bullish Fund (UUP) could prove profitable as capital flows out of the dollar.
Finally, this environment is bearish for precious metals like gold, which typically thrive on uncertainty. Gold has already struggled to hold gains above $2,400 per ounce, and a peaceful resolution would likely accelerate its decline. We see an opportunity in selling call spreads on the GLD gold ETF, betting that geopolitical calm will cap any further rallies.
