A deal won't bring oil back to USD 65. Here is what investors should do instead.

A US-Iran deal appears closer than at any point since the war began — and markets have spent this week pricing the optimistic scenario. The question is not whether a deal is good news — it is. The question is simpler: if the war ends today, does oil go back to USD 65? The answer is no.

Even if a deal is signed today, oil is not going back.

More than 1.2 billion barrels of oil have been removed from global markets since late February, according to S&P Global Energy — and a peace deal does not produce a single one of those barrels back.

Oil does not start flowing the moment a ceasefire is signed. Mines must be cleared before tankers can move safely, and production facilities require inspection before output can resume. ADNOC's CEO Sultan Ahmed Al-Jaber said even if the conflict ended immediately, it would take at least four months to reach 80% of pre-conflict flows. Full recovery is unlikely before H1 2027. Shell CEO Wael Sawan warned the supply hole is "deepening every single day — the journey back will be a long one." Dow CEO Jim Fitterling put the logistics backlog alone at 275 days.

The damage to energy facilities compounds the timeline further. Qatar's LNG facilities sustained direct hits to approximately 17% of export capacity, with repair timelines running to three to five years, QatarEnergy CEO Saad al-Kaabi told Reuters on 19 March 2026 — and Qatar is not an isolated case, with the IEA confirming more than 40 energy sites across nine countries severely damaged.

Then there are the permanent costs that a ceasefire cannot remove. Tanker war risk premiums will not normalise when a deal is signed — marine insurers will only reprice conflict zones after a sustained period of calm — meaning every barrel transiting Hormuz carries a structurally higher cost before it even clears the strait. That is before accounting for the "environmental fee" of approximately USD 1 per barrel that Iran is proposing on Hormuz transit. Iran has recognised that the Strait of Hormuz is an instrument of strategic leverage — it is now monetising that position, and its leadership has said publicly it will not return the strait to its previous state. A signed document does not change that calculus.

A deal cannot undo inflation that has already started.

The question is not whether inflation is coming. It came.

In the US, two independent inflation measures — the Consumer Price Index and the Fed's preferred Personal Consumption Expenditures index — both rose to 3.8% year-on-year in April, a three-year high. Core PCE came in at 3.3%, its highest in two and a half years, with rising prices outpacing wage gains for the first time in three years. In the eurozone, inflation accelerated to 3.0% from 2.6%, driven by a 10.9% surge in energy prices, according to Eurostat.

ECB chief economist Philip Lane, speaking in Tokyo this week, explained why. The supply shock has been 'masked until now by inventories' — meaning the disruption that began three months ago has not yet fully arrived at consumer prices. "Even if the initial energy shock starts to reverse," he said, "the second-round effects will be with us for a while" — meaning the pass-through from energy into wages, food and services is still incoming. KPMG chief economist Yael Selfin said the UK's April reading of 2.8% was "likely as low as it gets for some time," with inflation heading toward 4% by year-end.

US pump prices stand at USD 4.55 a gallon — up more than 50% from USD 3 before the war. Energy price increases accounted for more than 40% of the rise in US CPI in April, according to the Bureau of Labor Statistics. Every truck that moves food from a farm to a shelf runs on diesel that is now 50% more expensive, and every airline ticket reflects jet fuel costs that have not come down. Every field that needs fertiliser next season faces input costs shaped by a blockade that disrupted Gulf natural gas — the primary feedstock for fertiliser production — at the same time as it disrupted oil.

In the UK, producer input prices — the costs that manufacturers absorb before they reach the consumer — rose 7.7% in the year to April, according to the ONS. Ofgem has confirmed that the average household energy bill will rise a further 13% from July, to GBP 1,862 per year.

The second round has not yet arrived.

Every major central bank is responding to the same reality.

A country still recovering from a 2022 debt crisis just delivered its largest rate hike in three years. The cause: the Iran war, named explicitly in the central bank's own statement. Seven out of twelve economists polled by Reuters had forecast a 25 basis-point move at most. Sri Lanka's central bank delivered 100 — raising its policy rate to 8.75% on Tuesday, with Governor P. Nandalal Weerasinghe signalling more tightening ahead.

Sri Lanka is not an isolated case. The central banks of the US, Europe, the UK, Japan, Singapore, South Korea, New Zealand, Australia and India are all moving in the same direction — responding not to forecasts but to data that has already arrived.

The Federal Reserve. This week, Fed officials speaking at separate venues reached the same conclusion. Governor Lisa Cook: inflation is "clearly moving in the wrong direction" — "I am prepared to raise rates, if the expected disinflation does not appear in a timely manner." Kashkari warned of an "inflationary shockwave" that could persist even after a deal. Even Chris Waller — previously the Fed's most dovish member — now cannot rule out hikes. CME FedWatch — a futures-based market probability tool — prices at least one hike by December at approximately 46%.

The European Central Bank. François Villeroy de Galhau told CNBC in Singapore on Tuesday: "If I speak on behalf of the ECB, this means do what is necessary to bring inflation back to 2% in the medium term. Markets can be assured of that." Markets are pricing at least 50 basis points of hikes by year-end — and chief economist Philip Lane said the market does not require additional guidance, meaning the ECB is comfortable with exactly that.

The Bank of England changed direction sharply from where it stood three months ago. Until the war erupted on 28 February, markets had priced a near-certain rate cut — four of nine Monetary Policy Committee members had voted for one at the previous meeting. Two rate rises are now expected in 2026.

The Bank of Japan. Japan's corporate services producer price index rose 3.0% in April — the wage-driven inflation the BOJ said it needed to see before proceeding. Governor Kazuo Ueda, describing the current episode as Japan's "fifth oil shock," warned this week that "a temporary shock can become persistent if it changes wages, expectations, and price-setting behavior." The 10-year JGB (Japanese government bond) yield touched approximately 2.7% this week — its highest since the late 1990s.

Korea held 5-2, but the dot plot — the central bank's chart of projected policy rates — reveals a bias toward 3.00% within six months, up from the current 2.50%; Singapore tightened in April for the first time since October 2022; and New Zealand split 3-3, holding but confirming rates will need to rise sooner and by more than previously envisaged. Australia's RBA forecasts inflation peaking at 4.8% — "potentially above 5% should the conflict last longer than expected." India's Governor Malhotra named the Strait of Hormuz explicitly, projecting inflation at 4.6% for the coming fiscal year, above the RBI's own 4% target.

None of this is coordinated. Rate hikes are now a global regime.

The action plan has not changed

1. Don't panic sell. Rate hikes are coming — but that is not a reason to sell. In 2022, the Fed's most aggressive hiking cycle in four decades drove the S&P 500 down 18.1% — the two years that followed delivered back-to-back total returns of 26.3% and 25.0%, one of the strongest recoveries on record.

2. Reposition — don't retreat. The repricing from higher rates falls hardest on assets whose value depends on distant future cash flows — loss-making technology names, REITs and high-multiple growth stories are the names to reduce. High-quality technology companies with strong balance sheets and resilient earnings are a different story: rotate toward those, and away from the names where the valuation depends on a future that rising rates are making more expensive.

The Asia rotation we outlined previously remains the correct one — and the case for it is stronger now than when we made it. At 22.3x times forward earnings — the market's consensus profit estimate for the next twelve months — the S&P 500 is pricing in perfection. The MSCI Asia ex-Japan Index is not, trading at 13.7x across markets with genuinely different structural drivers.

For fixed income specifically: short-duration bonds are not the place to hide — they are the place to invest. When rates are rising, long-duration bonds suffer as their prices fall with every yield move upward. Short-duration bonds mature quickly, returning capital that can be reinvested at the prevailing — and rising — rate.

3. Start or continue your RSP. A regular savings plan — investing a fixed amount every month, through the uncertainty and into the recovery — works regardless of how this resolves. The investors who benefit most from the eventual normalisation are the ones who stayed invested through the noise, in the right assets.

Table 1: Recommended products

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report holds positions in iShares Hang Seng Tech ETF, Global X Asia Semiconductor ETF, and WisdomTree Asia Defense Fund.