KVIG Informative

President Trump signed a memorandum of understanding with Iran at the G7 summit in Versailles, France on Wednesday, formally ending the U.S. military blockade of the Strait of Hormuz. Oil prices are falling. Markets are surging. Trump is calling it the greatest deal ever made. Critics say it achieves less than the agreement he spent years attacking.

U.S. Central Command announced Wednesday evening that American forces were no longer impeding transit of vessels to or from Iranian ports. The Strait of Hormuz, through which roughly a fifth of the world’s oil flows and which had been partially blockaded since the conflict began in February, was reopening. Trump signed the memorandum of understanding with Iranian officials at Versailles, where the G7 summit was being held, and immediately declared it a historic achievement.

The market reaction was immediate and significant. Oil prices fell sharply on the news, with crude dropping toward levels not seen since before the February strikes on Iran. The Strait’s reopening removes the primary supply disruption that had driven gasoline above $4 per gallon and sent the Consumer Price Index to its highest level in years. Semiconductor stocks surged, with Marvell Technology up more than 12 percent, Sandisk up 11 percent, and Intel up more than 10 percent. The Russell 2000 and Nasdaq both rose after the Fed’s rate decision earlier in the day.

Trump held an hour-long press conference in which he defended the deal against critics who have argued it achieves even less than the 2015 Joint Comprehensive Plan of Action — the Obama-era nuclear agreement that Trump withdrew from in 2018 and spent years describing as the worst deal ever made. Trump pushed back sharply, saying Iran would not have a nuclear weapon and that the Strait was immediately open, and warned that he would bomb Iran again if it did not adhere to the agreement’s terms. He also broke with Israel during the press conference, saying the U.S. ally had a right to defend itself against Hezbollah but that he believed they were at times too heavy-handed.

The deal’s specific terms were not fully disclosed at the time of publication. Iran has indicated it will cancel negotiations and re-impose its blockade if the terms of the MOU are not met, suggesting the agreement is conditional and subject to ongoing verification. The war began on February 28 with coordinated U.S. and Israeli strikes on Iranian nuclear and military infrastructure. The conflict degraded Iran’s nuclear program, disrupted global energy markets, drove the highest inflation readings in years, and killed an unknown number of people on all sides. The ceasefire that followed was fragile for weeks, with U.S. strikes continuing even during active negotiations.

At the G7, Trump also joined other world leaders for a working lunch on AI policy. Anthropic CEO Dario Amodei urged democratic nations to avoid fragmenting AI access and standards, warning that restrictions on advanced AI models could weaken cooperation and security among allies. OpenAI’s Sam Altman backed that position. French President Emmanuel Macron and Indian Prime Minister Narendra Modi pushed for a cooperative framework ensuring allied countries retain access to frontier AI while developing safety standards. Defense Secretary Pete Hegseth announced a separate six-month Pentagon review of U.S. forces in Europe.

The economic implications of the deal’s signing will take weeks to fully materialize. Oil prices are falling today, but gasoline prices at the pump typically follow crude prices down more slowly than they follow them up — the rockets and feathers dynamic that economists have documented for decades. The inflationary impact of the war on the broader economy, including the pass-through into food, transportation, and consumer goods, will not reverse immediately. What the signing does is remove the primary ongoing supply disruption. Whether it holds is a different question. Iran said it will reimpose the blockade if the terms are not met. The terms have not been fully disclosed.