Iran-US Draft Reshapes FX Risk Premia on Strait of Hormuz

Iran's state television released a draft of the initial unofficial framework for a Memorandum of Understanding (MoU) with the United States. The draft outlines a path toward de-escalation in the Strait of Hormuz, where roughly one-fifth of global oil transits. According to the text, US military forces would withdraw from the vicinity of Iran and lift the naval blockade. Iran commits to restoring the number of commercial transit ships through the strait to pre-war levels within one month. Ship traffic management would be handled by Iran in cooperation with Oman. If a final agreement is reached within 60 days, the deal would be formalized as a binding UN Security Council resolution. The Islamabad memorandum framework is not yet finalized. Iran says it will take no step without "tangible verification."

Strait of Hormuz Draft and FX Risk Premia

This is the first concrete signal of a possible resolution to the conflict that has kept a geopolitical risk premium embedded in oil prices and safe-haven currencies since the escalation. The Strait of Hormuz carries roughly one-fifth of global oil transit, and any credible path toward normalizing traffic reduces the probability of a near-term supply shock. For currency traders, the immediate effect is a rotation away from safe havens. The USD/JPY pair tends to strengthen when risk appetite improves, and the yen is already giving back gains as the draft circulation hit screens. EUR/USD stands to benefit from reduced risk-off bias, though the euro's own economic headwinds cap the upside. Oil-linked currencies such as NOK, CAD, and to a lesser extent AUD are the most direct beneficiaries because a lower geopolitical risk premium weighs on oil futures and boosts the terms of trade for exporters. A sustained move lower in crude would compress risk premia further, giving commodity bloc currencies room to rally.

JPy and CHF Positioning Under Pressure

The immediate consequence is a squeeze in safe-haven positioning. USD/JPY has already ticked above the 150 handle in early trading as yen longs unwind. The same dynamic is pressuring CHF against the euro. For oil-linked currencies, the correlation with crude prices is the transmission mechanism. NOK/USD and USDCAD are the most sensitive because both central banks factor oil revenue into their rate outlooks. A sustained drop in Brent crude would support the krone and the loonie, the move is contingent on the deal staying on track. The Australian dollar, while less directly oil-exposed, benefits from the broader risk-on sentiment that the draft encourages. A trader should use the forex correlation matrix to confirm whether the usual oil-currency correlations are holding in this session.

60-Day UNSC Window as Binary Timer

The real test begins now. Markets have absorbed the draft as a positive catalyst, the 60-day clock has not started until the US and Iran formally engage on the Islamabad framework. The next decision point is any official statement from Washington confirming a willingness to negotiate on the terms described. Should the White House dismiss the draft or demand additional conditions, the entire risk-on move would be vulnerable. On the other side, if both sides begin to implement verification steps – such as reduced naval patrols or Omani-managed transit logs – then the timeline becomes credible, and the assumption of a binding UNSC resolution within two months could lock in lower risk premia. For now, the trade is to fade the immediate euphoria because the draft is a proposal, not a signed document. A more disciplined entry waits for evidence of tangible verification, not just headlines.

For traders tracking this directly, the forex market analysis page covers the daily sentiment breakdown across all majors. The currency strength meter can help gauge whether the risk-on shift is broad enough to sustain wider positions. The 60-day window leaves plenty of time for the trade to work, only if the draft survives its first contact with reality.