Goldman Sachs: After Iran Deal, Four Types of Assets to Trade
N.R. Finch
Goldman's macro trading desk lays out a playbook for four asset classes under an Iran peace-deal scenario — oil, rates, bonds, and equities each have a direction, but not all are worth chasing.
The deal lands — what moves first?
Macro traders Rikin Shah and Cosimo Codacci-Pisanelli see a clear initial reaction: oil futures down, rates and rate volatility lower, the yield curve steepens, equities up.
This is not speculation. Every time a headline has pushed deal probability higher, markets have followed the same script.
In plain terms = the market has rehearsed this trade many times; signing the deal just turns the rehearsal into the live show.
Which assets are worth chasing?
Equities still have room to run. Goldman has raised its year-end S&P 500 target to 8,000, backed by a strong Q1 earnings season. But the pace should slow, and the rally has been concentrated in AI and energy — whether consumer-facing sectors can take the baton remains an open question.
UK short-end rates are singled out as chaseable — a softening labour market reopens the door for rate cuts.
Rate volatility can be sold further as the distribution range narrows. This means → the market is betting on fewer surprises, and vol sellers have the edge for now.
Goldman adds a caveat: given recent gains, downside hedges remain necessary, and equity returns ahead of midterm elections have historically been mixed.
Which assets should you avoid?
European short-end rates — Goldman sees no rate cut in the current probability distribution; the initial move could reverse. The ECB's June hike is virtually locked in (priced at 23 basis points), while July pricing has dropped to just 7 bps.
This reflects the ECB's stance: April meeting minutes show that inflation pass-through effects will drive action in June, but second-round effects remain limited, supporting a gradual path afterward.
10-year DM government bonds — there is almost no political will globally to pursue fiscal consolidation, capping how far long-end yields can fall. The risk premium is most persistent in Japan, where monetary policy has been slowest to respond to the inflation shock.
US rates — why is Goldman sitting this one out?
Since the Iran war began, the US short-end sell-off has exceeded Europe's and the UK's, but for different reasons: Europe and the UK were driven by energy prices lifting breakeven inflation, while the US move is more about real rates rising — underpinned by a stabilising labour market, fiscal tailwinds, strong Q1 earnings, and rising AI capex expectations.
Markets now price in nearly one full hike by April 2027. Goldman considers the 25 bps of hawkish term premium already sufficient.
Put simply = unless new Fed Chair Warsh actually starts a hiking cycle, the odds of winning a short-US-short-end trade are poor. Second-half risks from high prices squeezing consumption and fading fiscal support are also building. Goldman stays neutral.
Inflation pricing — follows oil short-term, but useful later?
In the near term, inflation pricing will track oil; a deal landing means more downward pressure on crude.
Medium-term, however, Goldman sees inflation-linked assets as a potentially good portfolio hedge.
This means → energy-price pass-through into core inflation is still incomplete; once it kicks in, inflation pricing could move higher, offering protection for the broader book.
Content is for reference only, not financial advice.