This morning, global stock markets rallied sharply and oil prices slumped as Israel and Iran both agreed to a US-backed ceasefire to end their 12-day war. The move to de-escalate the conflict came just hours after Iran fired missiles at a US base in the region, in a retaliation largely seen as symbolic and showing Iran wanted to seek an end to the war. Trump’s high stakes gamble to hit Iran’s nuclear sites may just have paid off.

But as of send time it looks like Iran breached the ceasefire by launching missiles into Israel, which has promised to respond with force...we're not over the line yet and the market is on the hook for more headline risk, although it seems equity markets have generally held onto gains despite the breach of the peace...investors were not massively perturbed by the war in the first place and seem to be looking for the positives here. Equities pulled back from their highs of the day and oil bounced a touch but only modestly and the main risk-on narrative is holding.

The sharpest reaction was in crude markets as they had been about the only corner of the markets to see any really stress in the lead-up to this. Brent has dived from above $80 to below $70, shedding another 5% this morning to add to yesterday’s 7% decline,  in a brutal move that has done a lot of technical damage which will likely take some time to recover from.

US stock markets were already in bullish mood last night with the S&P 500, Nasdaq and Dow Jones all rising by almost 1% on hopes that the Iranian response to the US strikes was puny enough to suggest they lacked any appetite to push this further.

Asian markets rallied overnight and European stock markets have kicked on with Israel this morning confirming that it had agreed to the ceasefire some time after Iran had done the same. The Iranian regime can sell the ceasefire coming as a result of its attack on the US, which indicates a willingness by the regime to preserve its power at the expense of any wider regional goals.  I think the regime has been caught napping and is chastened by this whole experience.

This morning in London we are seeing a plain reversal of some of the price action of the last week with travel shares up and oil majors lower. The FTSE 100 trades about three-quarters of a percent higher with BP and Shell the big drag as they slip 4-6% while airlines IAG and EasyJet leap 7%. Bunzl rose 2% after a more reassuring update –still down 28% for the year so far. On the FTSE 250, Wizz Air also jumped 7%. In Europe the CAC and DAX were both trading much firmer with gains in excess of 1.5% having stumbled a bit more on the prior weakness.

We’ve seen a broad relief rally for risk assets which includes sterling, with GBPUSD jumping towards 1.36 again after hitting its lowest level in over a month on the tensions in the Middle East as the dollar broadly pulled back.

Meanwhile another reason risk is bid this morning is arguably signs of a Fed pivot as Bowman echoed Waller in suggesting the FOMC is ready to cut in July should inflation pressures remain contained. Fed chair Jay Powell speaks today as he begins his semi-annual testimony on monetary policy in Congress.