TL;DR

Iran fired missiles toward a US military base in Kuwait overnight while IRGC naval forces turned back four vessels attempting to transit the Strait of Hormuz. A 60-day ceasefire memorandum of understanding has reportedly been finalized by negotiators, but it still requires President Trump's signature. Vice President Vance said the deal is "yet to be decided." Stock futures are near flat as traders weigh the risk of fresh escalation against the potential for a deal that reopens Hormuz shipping lanes. Brent crude settled mixed Thursday; the overnight developments leave Friday's open with asymmetric downside risk if Trump holds off or another exchange of strikes occurs.

What Happened

Late Thursday into early Friday, the US-Iran conflict produced a series of escalatory moves that threaten to unwind the fragile ceasefire progress made during the US session.

Iran's Islamic Revolutionary Guard Corps said it fired missiles at a US air base, which officials identified as being in Kuwait. Kuwait confirmed its air defenses were activated and the attack was intercepted. The IRGC framed the launch as retaliation for US airstrikes near Bandar Abbas airport on Wednesday that targeted a military site the Pentagon said posed a threat to vessels in the Strait of Hormuz.

In parallel, the IRGC navy confronted four vessels attempting to cross the Strait of Hormuz without prior coordination, firing warning shots and forcing all four to turn back. The Strait has been largely closed to Western-flagged and US-allied shipping since late February 2026, and Thursday's naval action represents one of the most direct enforcement episodes in recent weeks.

Against that backdrop, Axios reported late Thursday that US and Iranian negotiators had agreed on a 60-day memorandum of understanding to extend the ceasefire and open discussions on Iran's nuclear program. Reuters confirmed the broad terms of the arrangement. However, Vice President JD Vance said the deal is "yet to be decided," and a White House official said the two sides have "mostly agreed" to the terms, a formulation that implies final sign-off remains outstanding. The sequence of events, from Iran's earlier strikes on Kuwait to the vessel blockade at Hormuz, unfolded in the same window as those talks, complicating the deal's path to Trump's desk. Our earlier coverage of the ceasefire framework and the closing bell record session provide additional context on how quickly market sentiment shifted earlier Thursday.

Why the Kuwait Attack and Hormuz Blockade Matter for Markets

The Iran conflict has been the dominant macro variable for global oil markets since late February. The effective closure of the Strait of Hormuz, through which roughly 20% of global crude oil trade typically passes, has kept Brent crude elevated, contributed directly to the spike in April's PCE inflation to 3.8% (the highest reading in nearly three years), and forced supply chains to reroute around longer, costlier paths. For more on the Fed's reaction to the inflation backdrop, see our piece on Fed rate hike probability and the PCE data.

Markets closed Thursday at fresh records, with the S&P 500 up 0.58% and the Nasdaq Composite up 0.91%. Investor optimism centered on the prospect of a deal. The Axios report pushed equities to session highs intraday before stocks pared some gains as Iran's missile activity resurfaced. That sequence shows how tightly deal expectations are priced in.

Brent crude settled mixed at around $92-$93 per barrel. The overnight developments add uncertainty ahead of Friday's Asia open. As of late Thursday US time, S&P 500 and Nasdaq 100 futures were hugging the flatline, with Dow futures down less than 0.1%.

Implications for Active Traders

Crude oil and energy futures: Brent and WTI are the most directly exposed. Any confirmed deal with Hormuz reopening language would likely trigger a sharp pullback in crude prices. A breakdown in talks, or another Iranian strike on a US asset, would push Brent back toward recent highs. Energy sector equities would follow in the same direction. Natural gas, elevated due to rerouting demand, would be secondary to crude.

Equity index futures: US futures are near flat, but Asian markets will set the early tone. If Friday's Asia session opens with bad news on deal status, a modest pullback in US futures is the more probable path. The technology sector has been driving index gains on earnings strength and is somewhat insulated from oil and Iran headlines directly, but a broad risk-off move would still affect it through sentiment channels.

Crypto: Bitcoin has been under pressure, with spot Bitcoin ETF outflows running in the hundreds of millions per day and BTC trading below the $73,000 support level. A risk-off escalation driven by Iran headlines would likely add downward pressure. A deal announcement could produce a relief rally alongside equities and broader risk assets.

Potential Positives vs Negatives

Potential positives:

  • Negotiators from both sides have reportedly agreed on the broad terms of a 60-day MOU. The deal framework is further along than at any prior point in the conflict.
  • A White House sign-off would almost immediately reduce oil price pressure, easing the primary driver of elevated PCE inflation. Core PCE came in at 3.3% in April, in line with estimates, showing the Fed's preferred underlying gauge is not yet out of control.
  • Strong technology earnings have given equity markets a separate, independent bullish driver that does not depend on geopolitical resolution.

Potential negatives:

  • The Kuwait attack and the IRGC's warning of a "more decisive" response if strikes continue suggest Iran is not fully committed to ceasefire terms, even while negotiations proceed. The deal could collapse before Trump signs it.
  • Trump has publicly stated he is "not satisfied" with the deal terms and Vance confirmed no final decision has been made. A prolonged hold creates a window for further escalation over the weekend.
  • The Strait of Hormuz remains largely closed. Any new confrontation involving vessels or US military assets could trigger a fresh oil price spike heading into the weekend.
  • Bitcoin ETF outflows and sub-$73k price action suggest institutional demand has been fading before this latest round of geopolitical noise, leaving limited cushion for a risk-off event.

What Could Happen from Here

Base case: Trump signs the 60-day MOU sometime Friday or over the weekend, producing a moderate relief rally in equities and a meaningful pullback in crude. Hormuz sees limited vessel traffic resume under careful coordination. The S&P 500 holds record territory. Brent retreats toward $85-$88. Confirmed by a formal White House announcement before the Monday open.

Upside case: A rapid Hormuz reopening and credible nuclear negotiation timeline trigger a sharper re-rating of risk assets. Oil drops more aggressively, inflation expectations ease, and the Fed's path diverges from its current hawkish tilt. Equities extend the record run and crypto recovers toward prior highs. Confirmed by Brent breaking and holding below $88, alongside positive diplomatic language from both Tehran and Washington.

Downside case: Trump delays signing and a further exchange of strikes occurs, potentially targeting Hormuz infrastructure or a higher-profile asset. Oil gaps up at Monday's open, the dollar strengthens, and risk assets retreat. The Kuwait attack being confirmed as a deliberate act against a US-allied Gulf state could shift the diplomatic calculus further. Invalidated only by a formal deal announcement or a clear White House statement that signing is imminent.

What to Watch Next

  • Any White House statement or press conference on the Iran MOU status, especially a sign-off before markets open Monday.
  • Iran's response via official channels to the Wednesday Bandar Abbas strikes. Any new missile or drone launch targeting US or allied assets is a clear escalation signal.
  • Brent crude price action at the Friday Asia open. A gap above $95 signals markets are pricing escalation; a move toward $90 suggests deal expectations remain intact.
  • US stock futures through the Asia session. Watch whether futures hold near flat or slide if Iran headlines worsen overnight.
  • Bitcoin spot ETF flow data for Thursday, which should confirm whether institutional demand erosion is continuing or stabilizing.
  • Any new IRGC statements regarding vessel interdiction at the Strait of Hormuz, which directly impacts tanker routing and insurance premiums.

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Frequently Asked Questions

What is the Strait of Hormuz and why does it matter for oil prices?
The Strait of Hormuz is a narrow waterway between Iran and Oman through which roughly 20% of globally traded crude oil and petroleum products pass. When traffic through the strait is disrupted or closed, global oil supply tightens rapidly, pushing crude prices higher and raising inflation risk in oil-importing economies.

What does the Iran-US ceasefire MOU mean for energy markets?
A signed 60-day memorandum of understanding would signal that both sides are committed to pausing hostilities long enough to negotiate a broader agreement, including Hormuz reopening terms. Oil markets would likely price in a significant supply relief premium unwinding, which could push Brent crude sharply lower from current levels near $93 per barrel.

Sources

Header image source: pexels by Panumas Nikhomkhai. License: PEXELS.