Bas van Geffen, Senior Macro Strategist at Rabobank
Both Bloomberg and Axios report that the US and Iran have reached a tentative deal to extend the ceasefire by 60 days as they engage in further negotiations over Iran’s nuclear programme. However, Tasnim reported that the text of the memorandum of understanding had not been finalized.
US Vice President Vance said that the two sides are still “going back and forth on a couple of language points,” which reportedly includes the wording on Iran’s nuclear capacity. But the Vice President said that Iran appears to be negotiating in good faith, paving the way for Trump’s approval of the ceasefire extension.
While negotiators are trying to dot the i’s and cross the t’s of the memorandum, President Trump has reportedly asked for a couple of days to think about the final deal.
Energy prices fell further on the news that a deal could –again– be imminent, after the US administration made similar claims last week. Brent futures are currently down about 10% on the week. That, in turn, is lifting optimism in other markets. Yields dropped, and green figures returned on stock exchanges.
Admittedly, a 60-day extension would lessen some of the near-term tail risks – although both sides have accused each other of violating the current ceasefire. Just the past day, Kuwait intercepted a missile that Iran had fired at a US base, causing the US to respond with new “defensive strikes” on Iran.
More importantly, a ceasefire does not solve anything, unless the US and Iran manage to agree on the key sticking points during that extended ceasefire.
Treasury Secretary Bessent reminded everyone that Trump’s three red lines are unchanged: Hormuz must reopen, Tehran must end its nuclear programme, and Iran must transfer its highly enriched uranium. As we noted earlier this week, a nuclear deal still seems highly unlikely at this juncture.
Likewise, Iran still believes that it can effectively control traffic through the Strait of Hormuz, together with Oman, allowing it to put down toll booths along the strait. Even though this would allow paying ships to cross, that’s not a “reopening” in Trump’s view.
The US imposed sanctions on the Hormuz Strait Shipping Authority, which is supposed to collect the toll. And Bessent warned that “Oman, in particular, should know that the U.S. Treasury will aggressively target any actors involved –directly or indirectly– in facilitating tolls for the Strait.” President Trump even threatened to “blow them up” if Oman works with Iran to control shipping through Hormuz.
It still seems unlikely that the key sticking points will be resolved soon. On that basis, we have shifted our baseline for Hormuz to remain closed for up to three more months before we see a crisis resolution. Only if either the US or Iran blinks regarding the nuclear programme, could we see a quicker end to the conflict.
Meanwhile, tensions are rising in other parts of the globe too. Talks between the US and Cuba appear to have stalled, while Cuba and China discussed agricultural cooperation, food shipments, and political support. This increases the risk that the US may resort to military aggression. China, meanwhile, claims that a Dutch frigate entered their waters – which the Netherlands disputed; and a Canadian frigate transited the Taiwan Strait, defying Chinese warnings not to do so.
And, as we’ve noted before, even if the US-Iran conflict is resolved sooner, it would still take a substantial amount of time before energy flows return to some form of normalcy. So, some further inflationary pressure is inevitable.
Policymakers are also starting to realize this. The ECB’s Schnabel noted recently that “even if the war ended today, a lot of damage has already been done to energy infrastructure and global supply chains.” She adds that higher costs will probably trickle through global supply chains and into higher goods prices.
The accounts of the April ECB meeting suggest that Schnabel is not the only policymaker who’s concerned about the size and the persistence of the inflation shock. It therefore looks like a June hike is all but a done deal. According to the minutes, some policymakers said that the decision to hold or hike was already a “close call” for them in April. This group essentially indicated that they would not have opposed a rate hike last month, if this had been proposed as the path forward.
Today’s inflation data are further cementing the case for a rate hike. French HICP inflation rose to 2.8% y/y, while Spanish HICP inflation edged up to 3.6%. Meanwhile, business surveys indicate that companies expect to raise selling prices further – although selling price expectations eased a bit in May, compared to the steep increases in the two months prior.
And, worryingly, consumers’ medium-term inflation expectations have started to pick up alongside the rise in current inflation rates. As Schnabel pointed out, these shifts in consumer expectations could be a first indication that expectations are de-anchoring.
However, we still believe that the current backdrop is less conducive to broader and protracted inflationary pressures than 2021-2022. Yesterday’s business confidence survey indicated that employment expectations continue to score below the long-term average. The labor hoarding index remains above its long-term average, but businesses appear to hoard less labor than before.
Tyler Durden Fri, 05/29/2026 - 10:00Russia is deeply alarmed about US plans to deploy thousands of additional troops to NATO's eastern flank member Poland, slamming reports out of Washington as unacceptable and portending an escalation in the Ukraine war.
Russian Foreign Ministry spokeswoman Maria Zakharova said at a press briefing on Thursday that sending additional American soldiers to Poland "would result in escalation of tension across Europe" and that Moscow would be forced to take "retaliatory measures".
Getty ImagesGiven that some 5,000 troops are being moved there from Germany, she did acknowledge that reducing America's troop presense in Europe would overall be "rational, justified, and long-overdue" step toward stabilizing what she called an "imbalanced" security situation created by NATO and Western policies.
Weeks ago, the White House began threatening a significant and historic force reduction from Germany, following Berlin officials' repeat criticisms of the US-Israeli war against Iran. This was initially presented in media reports as part of a broader drawdown from Europe, but now it appears US forces are just being shifted around, and with 5,000 to be placed closer to Russia.
But these thousands more troops in Poland could induce Russia to respond with "military-technical measures." Zakharova in perhaps the most provocative part of her remarks warned that NATO is pushing the continent toward a "suicidal" conflict.
In total, some 10,000 US service members are stationed in Poland, on a regular rotation, and the new Washington deployment would see thousands more added to this - from among the 80,000 deployed across Europe.
Poland shares a border with Russia’s Kaliningrad Region, setting off further concerns about targeting and drone activity:
The deployment of additional US military forces to Poland could lead to a "qualitative escalation" of tensions between Russia and the West and force Moscow to take retaliatory measures, Russian Foreign Ministry spokeswoman Maria Zakharova said on Thursday.
Zakharova also said that the number of drone attacks on Russian territory from the direction of Europe and Northern European states was increasing.
Moscow has expressed concern that Ukrainian drones could be using Baltic or other countries' airspace to launch attacks on targets inside Russia, an assertion rejected by Kyiv and the three Baltic countries.
Warsaw has hit back, with Foreign minister Maciej Wewiór having told the Polish news agency PAP that allied troops in Poland were "a necessary reinforcement of NATO's eastern flank" as a result of Russia's aggression in Ukraine, and given the Kremlin's "escalatory rhetoric" towards the alliance.
Wiki CommonsWewiór additionally said the "real source of escalation and tensions in Europe" remains Moscow's "unlawful and aggressive military actions" – and not legitimate measures taken by NATO countries to defend their populations and borders.
Tyler Durden Fri, 05/29/2026 - 09:40