The latest announcement of a memorandum of understanding between the US and Iran is an important step forward. After months of open hostilities that have exacted a heavy toll -- in both lives and livelihoods -- and inflicted significant economic damage worldwide, the memorandum provides a much-needed foundation for diplomacy that could reverse the stagflationary spillovers of the war.
Since the war has complicated an already tricky outlook for most countries and companies, the announcement is understandably being celebrated. But as critical as it is, it's only a first step. A true return to global economic stability still depends on whether all the parties involved can move from a framework deal to a lasting agreement.
Of course, this uncertainty has not stopped global financial markets from reacting as though normal economic activity had already been restored. Expectations for a reopening of the Strait of Hormuz and a resumption of full-scale energy exports to international markets have triggered a sharp drop in global oil prices, and that, in turn, has boosted equity markets globally, as well as lowering borrowing costs.
