US & Iran Exchange Strikes, but Will Peace Conquer All? | Daily Market Update, May 26 2026

Added: 2026-05-26

[00:00:00]Good morning traders. Matt Weller here, Global  Head of Research with Forex.com. Today is Tuesday the 26th of May, 2026. We're coming off of  a long holiday weekend in the US and markets are generally optimistic. However, there are some  interesting developments between the US and Iran that I want to break down for you today as well  as look ahead to the key economic releases that we'll have throughout the week. Let's get into it.  So over the long holiday weekend, we saw progress toward a memorandum of understanding. From my eye,  this is still a ways from an actual peace deal, but nonetheless, the market's inclined to  give it the benefit of the doubt. We saw oil prices fall sharply, and we of course saw  major indices rallying on that news. However, today some of that move is being unwound after  the US and Iran exchanged strikes. The US striking what were purportedly mine laying vessels in Iran  whereas Iran shot down a couple of US and Israeli missiles. Nonetheless, here markets remain  generally optimistic that we'll see progress toward a deal. The last sticking point is about  25 billion in frozen Iranian funds in Qatar. If those are released, uh it seems likely that  we'll have at least a 60-day extension to the negotiating period and crucially for traders, a  path toward opening the Strait of Hormuz. More on that momentarily. Nonetheless, here we do see  oil prices bouncing back a bit. US indices though remain optimistic ahead of today's open. Spinning  it forward to look ahead to the rest of the week.

[00:01:34]I think the focus will remain on developments  between the US and Iran. We have a couple of uh economic reports for release. For instance,  consumer confidence today. But the main one I'll be watching is on Thursday we get the US core PCE  report, the Fed's preferred measure of inflation.

[00:01:51]Of course, we've seen other measures of inflation  on the rise. And if that's confirmed by core PCE, that would push back any expectation of a rate cut  and may indeed move the market closer to expecting a rate hike even though we now have Chairman  Warsh at the top of the Fed. Interesting report there that could have longer reaching implications  for monetary policy. As for the Strait of Hormuz, traders were optimistic that it could be returning  to normal, traffic fully reopened by the end of June. With this morning's strikes though, we see  the odds of that in prediction markets. This one from Polymarket falling here. We're at about a  coin toss from a high of closer to 70% implied odds of the Strait of Hormuz opening. So you  can see there's a lot of uncertainty here over the next 5 weeks or so. And if we can start to  get more progress here toward a full reopening, that's where we could see risk assets extend  their rally as the markets discounting a likely deal between the US and Iran sooner rather than  later. And today's chart of the day could be nothing other than WTI crude oil. I think last  week I highlighted a broad symmetrical triangle pattern here in this instrument. You can see we've  now broken lower suggesting that again markets are optimistic that we could see more progress toward  uh supply flowing through the Stait of Hormuz.

[00:03:08]Again, I want to highlight from this chart that  we've also seen a breakdown in the 14-day RSI's equivalent symmetrical triangle pattern. So the  next levels to watch to the downside are around 85 where we put in a low in early May and then  below that near 80 which is essentially the lowest level that oil has traded at since the US and Iran  war started. That is today's video. Thank you for carving a couple minutes out of your day to watch.  If I could ask just one quick favor before you go, please do drop a like on this video. That  helps us with the algorithms and we'll get more viewers to this video. And if you're  not already, please do subscribe to our YouTube channel at Forex.com. Thanks again  and best of luck with your trades today.