Asian currencies surge, oil slumps as US-Iran peace deal reshapes markets

The announcement of a preliminary peace framework between the United States and Iran on Sunday, June 14, triggered an immediate and broad-based relief rally across global markets. The deal — which includes an end to military operations and the toll-free reopening of the Strait of Hormuz, through which roughly 20% of the world's oil and LNG supplies normally transit — was confirmed by President Donald Trump and Pakistani mediators . Oil prices plunged, the US dollar weakened sharply, and Asian equities and currencies surged on Monday before momentum stalled as investors demanded more detail.

Oil prices: the sharpest move

The most dramatic market reaction came from energy markets. Brent crude, the international benchmark, fell over 5% to $82.84 per barrel on Monday, while US West Texas Intermediate dropped 5.4% to $80.26 . Both contracts reached their lowest levels since March 10 . In early Asian trading on Monday, Brent was down 4.1% and WTI down 4.7% . By Tuesday, oil continued to slide, though the pace of decline moderated as the initial shock faded and traders began to question how quickly tanker traffic could resume through the Strait .

The oil-price collapse reflected the unwinding of a geopolitical risk premium that had built up over nearly four months of hostilities. During the conflict, crude peaked at roughly $120 per barrel . The reopening of Hormuz, if realised, would remove the single largest supply-chain bottleneck that had driven up prices of petrol, diesel, and jet fuel globally .

Asian currencies rally, then stall

South Korean won

The Korean won was among the biggest beneficiaries of the risk-on turn. On Monday, it opened at 1,511.4 per dollar and strengthened further intraday to touch 1,504 won — its strongest level since June 1 . It closed the onshore session at 1,511.1 per dollar, down 8.7 won from the previous session . The KOSPI benchmark jumped 5.2% . Analysts pointed to easing risk aversion as oil prices declined, though they cautioned that a quick drop to the 1,400 won range was unlikely given continuing uncertainty over foreign equity outflows and upcoming interest rate decisions in the US and Japan .

On Tuesday the won appreciated slightly to 1,507.5 per dollar in its third straight session of gains, but the move was far more measured as broader Asian currencies gave back some of their Monday advances .

Indian rupee

The Indian rupee gained alongside other Asian currencies on Monday as the dollar weakened . It closed at 94.56 against the dollar on Tuesday . On Wednesday June 17, the rupee opened 11 paise higher at 94.45, aided by a further drop in oil prices — Brent had fallen below the $80-per-barrel mark — and a softer US Dollar Index around 99.50 . Analysts at Finrex noted that while falling crude was supportive, weakening in broader Asian currencies ahead of the Federal Reserve's June 16-17 policy meeting could cap further gains .

Philippine peso

The Philippine peso strengthened by 87 centavos on Monday to close at P60.48 against the dollar, its strongest finish since May 7 . Philippine stocks soared nearly 7% as the peace deal dramatically lowered oil-price risk for the net energy importer . The peso continued to strengthen on Tuesday, finishing at P60.32 — an almost two-month high — in what was described as its best close since April 22 .

However, Reuters reported on Tuesday that most emerging Asian currencies gave up ground as a lack of concrete ceasefire details tempered optimism. The peso ended a six-session winning streak during Tuesday trade according to one report, easing to 60.458 per dollar . This conflicting data from different sources underscores the choppy, headline-driven nature of trade on Tuesday.

The dollar weakens across the board

The US dollar hit a 10-day low on Monday as the peace framework sent investors out of safe-haven assets and into riskier currencies . The dollar's decline was broad-based: the yen strengthened to 159.7 per dollar, the euro rose to $1.1616, and the Indonesian rupiah climbed more than 1% to 17,680 per dollar, its strongest since May 22 . S&P 500 futures rose 0.8% in early Asian trading . The risk-on rotation was described by analysts as "positive for risky currencies, negative for the US dollar" .

South Korea's regulatory defense of the won

It is important to understand that South Korea's currency was under severe pressure well before the peace deal was announced. The won had slumped to its weakest level since 2009 , trading above 1,560 per dollar intraday , driven by escalating Middle East tensions and speculation the Federal Reserve might raise rates further .

In response, South Korean authorities announced a series of aggressive measures in the week before June 14:

• Tighter oversight of offshore currency derivatives and stepped-up inspections of banks' FX operations .
• A special joint foreign-exchange inspection by the Bank of Korea and the Financial Supervisory Service to check for speculative transactions betting on further won depreciation .
• Tougher action against "speculative market-disrupting behavior" — the Financial Supervisory Service held an emergency meeting with executives from KB Kookmin Bank, Shinhan Bank, Hana Bank, and Woori Bank, urging strengthened controls .
• The National Pension Service expanded its FX hedging through USD forward selling, effectively supplying dollars to the market .
• Unusual direct intervention — the Bank of Korea and the Ministry of Finance and Economy issued a joint verbal intervention statement during sharp intraday volatility . Finance Minister Koo Yun-cheol warned that the government would not "tolerate excessive volatility or one-sided moves" .

These measures were proactive, defensive steps taken before the peace deal was announced. No new South Korean regulatory measures specifically triggered by the peace deal itself were reported through Tuesday, June 16.

Why the rally stalled: what we don't know

Despite the dramatic market moves, several key uncertainties persist that limited the rally and may continue to weigh on asset prices :

The deal is not yet signed. A formal signing ceremony is scheduled for Friday June 19 in Switzerland, and the framework remains non-binding until then . Markets are effectively pricing in an agreement that does not yet legally exist.

No detailed terms have been released. Investors remain cautious because the announcement was light on specifics — no text of the agreement has been published, leaving questions about enforcement mechanisms, monitoring provisions, and the scope of both sides' commitments .

Trump's characterisation vs. Iranian statements. President Trump described the deal as "complete" and said he had ordered the US naval blockade lifted , but Iranian officials have not confirmed the same level of finality . This asymmetry in public statements creates ambiguity about whether both parties are truly aligned.

Oil-flow timeline is unclear. While the Strait of Hormuz is supposed to reopen toll-free, it is uncertain how quickly shipping can resume at full capacity. The Strait had been effectively obstructed for nearly four months . Even a phased reopening would affect the pace at which oil prices normalise and inflationary pressures ease.

Broader Middle East risk remains. The conflict lasted nearly four months and underlying tensions — including the unresolved status of Iran's nuclear program — could resurface . Some analysts warn that the durability of the risk-on rally should not be taken for granted .

MUFG Research noted that in a sustained reopening scenario, the risk-reward for currencies like the Korean won "to do better moving forward is quite high", forecasting USD/KRW moving toward the 1,400 handle over time . But that forecast depends on the deal holding — and as of Tuesday, markets were still waiting for proof.