Confirmation of an end to US-Iran hostilities and the reopening of key trade routes will provide a summer uplift to the global economy and ease pressures to raise borrowing costs.
President Donald Trump has said a deal to end the conflict is scheduled to be signed on Sunday, though Iran cast doubt on the timing.
In a post on social media, Mr Trump said the Strait of Hormuz, a key shipping route, would be “open to all” once the deal is agreed. However, one source said it is the 39th time that the president has declared US-Iranian talks to be close to agreement.
This latest announcement has helped drive oil prices lower and stock markets higher. Despite the war sparking a rise in inflation, the Bank of England was already expected to keep interest rates on hold at this week’s meeting.
An agreement to end the US-Iran war will allow the economy and inflation in particular to drift back toward trends before being knocked off course at the end of February. Even so, most economists believe the impact will continue to be felt into next year.
Apparently referencing Iran’s enriched uranium stockpiles, Mr Trump said that “at the appropriate time, when all is calm, we will go in and get the Nuclear Dust”, adding that it would later be destroyed.
Key mediator, Pakistan, has supported the US President’s claims saying it was “preparing for the electronic signing”. Its prime minister Shehbaz Sharif said that “we are closer to a peace deal than ever before”.
The conflict began with US and Israeli strikes across Iran on 28 February, prompting Iran to attack Israel and US-allied states in the Gulf – as well as effectively closing the Strait of Hormuz, a key shipping route for the world’s oil and liquefied natural gas.
It has drawn in other countries, with attacks also on the UAE where local reports have emerged of news blackout on some of the incoming missiles.
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