So we have a ceasefire in the Gulf. Chances have improved we are seeing the end of war. This is propelling a relief bounce on financial markets. But the truce is fragile as US and Israel have a different view of the truce than Iran. A ceasefire is not the same as peace. Risks are still rife – and it will take time before energy supplies and prices are back to a new higher normal.

Whether the ceasefire actually will hold depends on the negotiations which are starting now. Already, after only one day, Iran claims that Israel has broken the agreement by bombing Lebanon. Iran’s 10-point program will not in total be acceptable to the US, despite President Trump claiming it is a good starting point for negotiations.

For the rest of the world, who is going to control the Strait of Hormuz is, of course, of special interest. Iran has learned it has a strong position and will not give it up. The same goes for its demand to keep its nuclear facilities. On the other hand, it is difficult to see President Trump re-escalate and once again start threatening obliteration, war crimes, end of civilisation etc etc. Not with his domestic polls low, an unpopular war and defeat looming in the mid-terms. He needs a negotiation outcome which he could call a victory. And that is something Iran knows as well as China, who looms in the background.

What is the chance of a positive outcome for the negotiations during the next few weeks? Hypothetically it could work out. Iran will cling on to its control over the Hormuz Strait, but some kind of compromise may be reached, with an international authority monitoring the passage and Iran sill getting some toll revenue. Iran may possibly also abstain from getting nuclear weapons (at least in words but continue to clandestinely research and build) in exchange for security guarantees. However, we don’t see the Iranian government trusting such guarantees from the US; this must be part of a broader international agreement.

These are tall orders indeed, and we expect complicated negotiations, with clear risks of breakdown. Financial markets, however, have reacted with glee – understandably so, since the tail risk of total devastation has diminished.

Crude oil forwards fell sharply after the news of the truce – but then recoiled up again as it became clear that negotiations will be tricky. One could envision what would happen if the negations stall during the next two weeks. Volatility is thus likely to remain.

The positive scenario might yet happen, but there are several other risks on the way. There are some 800 vessels stuck in the Strait, and it will probably take more than two weeks to get them all out – and even longer to get them top their destinations. At the same time, several production facilities around the Gulf have been damaged and it will take months – in some cases years – to get them back to full capacity.

Thus, we believe oil and gas spot prices will take somewhat longer to come down, and probably not to levels we saw before the war. A certain risk premium regarding a resumption of hostilities is also reasonable. Thus, even after a peace truce we should count on oil prices to stay slightly above where they were before the war.

Bond markets have reacted by lowering key rate expectations slightly, after the sharp revision up during the war. Stock markets are, of course, happy. Rightly so. The risk of a long and devastating war has fallen. But we see clear risks of disappointments both for bonds and stocks as the rally may overshoot.

Assuming that there nonetheless will be some kind of peace within a month or so, the global economy will in a sense be back to where it was in February. This means a global macro situation which was gradually – but only gradually – improving. Inflation was coming down (before fears about war started putting upward pressure on commodities). Growth was so-so, doing OK in the US and slowly improving in Europe. Central banks were widely expected to stay where they were, and the case of the Fed cutting once or twice before year-end. That picture still holds, and we may even see a short-term improvement because of a psychological boost, should the war actually end.

In this situation, the stock market will once again face the questions it faced before the war: strong profits speak in favour of continued strength, while worries about over-valuation of tech constitute risks. AI churn will resume, with a continued shake-up among stocks depending on whether companies will gain or lose during the phase of creative destruction. A continued but slow rotation out of US assets to Europe and Emerging Markets should resume. Headaches over the vulnerability of private credit will resurface.

The lasting effects of the (hopefully short) war are three:

• Increasing mistrust in the US position as the leading Western power. Trump’s inconsistencies and flip-flops have made it even more perilous to trust him. We will see former allies increasingly seek new friends and new trade lines. The dollar will weaken again, after a period of safe haven in war times. China will continue to gain in influence.
• More nations will speed up self-reliance of energy, investments that will generate higher growth. More countries will thus build solar, wind, water, biofuel, nuclear, battery capacity and smart grids. Investments in modern energy and infrastructure will increase.
• The electro-state China will gain, while the US petro strategy (“drill baby, drill”) will prove to be a long-term mistake.