Michael Wan, a senior currency analyst at MUFG, cautioned that securing a durable deal could be difficult given that Iran’s demands “seem hard for different parties, including Israel and the Gulf states, to accept.”
“As such, we think any agreement on paper will likely be an extremely unstable equilibrium, and we think further meaningful bouts of volatility are more likely than not moving forward,” Wan wrote in a Wednesday note.
Key questions also remain over what concessions Iran might offer in return. Even in the event of a breakthrough, energy markets may not stabilize immediately.
If the Strait of Hormuz were to reopen right away, it would take time for energy flows to normalize due to earlier production shutdowns and the slow restart of oil and gas infrastructure, Wan said.
Shipping constraints and risk aversion among insurers are also likely to delay a full recovery.