Middle East and rising oil prices are running the show in the rates markets

Chris Cheverall, head of UK at CMC Markets, said: “The market may be too quick to assume that a political resolution would also be a rates resolution. A deal with Iran could quickly remove some of the geopolitical risk premium, but that doesn’t mean the inflationary pressure disappear at the same speed.

“If oil, gas, freight and insurance costs remain elevated after an agreement, central banks are still left with the same problem: how long they can look through an energy shock before it starts feeding into wages, business pricing and inflation expectations.

“A peace deal could be enough to lift equities and risk appetite without materially improving the outlook for interest rates. Markets may therefore celebrate the end of the political crisis before the economic consequences have actually gone away.”