A senior advisor to Iran’s Supreme Leader, Ali Shamkhani, indicated late Wednesday that Iran is prepared to finalize a nuclear agreement with the United States under specific conditions, contingent upon the lifting of economic sanctions by the U.S. government, according to a report by NBC News. This development comes amid ongoing efforts to de-escalate tensions and revive international cooperation on Iran’s nuclear program.
Shamkhani reportedly stated that in exchange for the immediate and complete removal of all economic sanctions imposed on Iran, the nation would commit to a verifiable pledge of never developing nuclear weapons. This commitment would include the elimination of its stockpiles of highly enriched uranium that could potentially be weaponized, an agreement to enrich uranium only to the lower levels necessary for civilian applications such as power generation, and the allowance of comprehensive international inspections to rigorously supervise the entire process. Such a deal would represent a significant step towards re-establishing international oversight of Iran’s nuclear activities and potentially easing economic pressures on the country. The proposal also addresses concerns regarding Iran’s compliance with the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal, which was previously agreed upon but later abandoned by the U.S.
Market reaction
As of the time of this report, the price of Gold (XAU/USD) is exhibiting a gain of 0.14% on the day, trading at $3,181 per ounce. This marginal increase could be attributed to the risk-on sentiment potentially generated by the news of possible de-escalation in the Middle East. However, the market’s reaction remains relatively muted, suggesting that investors are adopting a cautious approach, awaiting further clarity and confirmation regarding the proposed nuclear agreement. Broader market indices and other commodities are also being closely monitored for any significant movements in response to these developments.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
