President Donald Trump announced a significant shift in U.S. sanctions policy, authorizing China to resume purchasing oil from Iran. This decision, announced Tuesday, ends a years-long U.S. policy that had barred such transactions through sanctions targeting Tehran’s energy sector. Trump indicated that the policy change was also intended to encourage additional Chinese purchases of U.S. oil, stating it was his "Great Honor to make this happen." The restrictions on Iranian oil exports were first reinstated by the Trump administration in 2018, following the withdrawal from the Obama-era nuclear agreement with Iran, and had included sanctions on three Chinese oil importers.

This policy reversal comes amid ongoing efforts by the Trump administration to stabilize oil markets and de-escalate tensions in the Middle East. Over the past week, President Trump successfully brokered a ceasefire between Iran and Israel following days of hostilities, which eased investor fears that Tehran might close the Strait of Hormuz. The Strait of Hormuz is a crucial maritime corridor responsible for carrying approximately one-fifth of global oil supply. U.S. Energy Secretary Chris Wright addressed concerns about potential disruption, noting that the United States is now a net oil exporter and would not be significantly impacted by a closure, adding that Iran would harm itself more than others.

In the wake of the ceasefire and the easing of sanctions, oil prices fell sharply. West Texas Intermediate (WTI) crude futures dropped more than 8% on Monday, settling around $67 per barrel, while Brent crude, the international standard, declined to $70 per barrel. By Tuesday, WTI dipped further to $65 per barrel. Industry analysts had previously warned that any disruption in the Strait could drive oil prices as high as $120 per barrel; however, the Trump administration’s diplomatic actions appear to have calmed markets for the time being. The lifting of sanctions on Chinese oil imports from Iran is also expected to boost diplomatic and economic coordination between the United States and China, particularly in energy trade.

Global stock markets reacted positively to the de-escalation of Middle East hostilities. U.S. stock futures were largely flat to up on Wednesday, following a Tuesday close where the Nasdaq 100 reached a record high, and all three major indexes gained more than 1%. Investors are showing a preference for tech and AI-linked stocks, with the "Magnificent 7" poised to lead U.S. stocks higher as the market refocuses on the AI trade. Hedge funds are also reportedly shifting their focus back to the U.S. market after a period of European outperformance.

Federal Reserve Chair Jerome Powell delivered his second day of testimony on Capitol Hill, reaffirming the Fed's wait-and-see stance on interest rate cuts. This comes after criticism from Trump and follows the Fed's emphasis on a cautious approach as tariff-led price pressures begin to affect the economy. However, Powell also noted that a lower-than-expected inflation reading or weakness in the labor market could prompt the central bank to cut rates sooner. A surprise deterioration in U.S. consumer confidence on Tuesday also kept the possibility of an immediate rate cut in July open, with money markets pricing in about 60 basis points of rate cuts by the end of 2025.

In corporate news, BlackBerry shares surged 14% after boosting its fiscal-year sales guidance and reporting better-than-expected revenue. QuantumScape made a significant leap forward in its solid-state battery production process, leading to a 31% rise in its shares. Conversely, FedEx shares fell after posting mixed results and a disappointing quarterly profit forecast due to tariffs, and Tesla logged another month of sales declines in the EU. Torrid Holdings saw a 26% drop postmarket after announcing a secondary stock offering and a $20 million buyback. Worthington Enterprises rose 10% after reporting better-than-forecast fiscal adjusted earnings.

Further geopolitical developments include the Israel-Iran conflict prompting China to reconsider the Power of Siberia 2 pipeline project, which would carry Russian natural gas to China. This renewed interest stems from Beijing's concerns about the reliability of Middle Eastern energy supplies, despite the fragile ceasefire. Analysts noted that while the Iranian regime has been dealt significant blows to its nuclear and missile capabilities, it remains weakened but intact. Meanwhile, the NATO summit saw President Trump reiterating his commitment to the alliance while continuing to demand increased defense spending from European allies.

Other market dynamics include the dollar edging higher as Powell maintained his cautious stance on rate cuts, although its gains were limited during the Middle East turmoil despite its safe-haven role. Treasury yields were largely unchanged, as market participants drew a line under geopolitical tensions to refocus on fundamental economic data. Investment strategists noted a growing concern among European strategists regarding the safety of U.S. Treasury investments. In the metals market, gold futures ticked up, while copper supply tightened due to declining inventories. Aluminum prices were down on news of the Middle East ceasefire, lowering risks of supply shocks.

New investment opportunities are emerging, with an investment platform planning to use blockchain technology to sell investors exposure to SpaceX through digital "tokens." Nvidia is also making moves into cloud computing, launching its DGX Cloud service and investing in AI cloud players, posing a nascent threat to established giants like Amazon, Microsoft, and Google. In domestic politics, Zohran Mamdani appeared poised for an upset victory in the New York City mayoral primary.