The ASX Today: Oz market surges to 2-month high as US-Iran deal sparks relief rally

The ASX 200's advance to a two-month peak reflects risk-on sentiment driven by de-escalation expectations in US-Iran tensions. Lower geopolitical premiums typically reduce energy volatility and redirect capital toward risk assets, explaining the broad-based rally across equities rather than a flight-to-safety pattern.

Gold miners and BHP benefited from dual tailwinds: falling oil prices reduced input costs for mining operations, while the commodity exposure of these names historically outperforms during periods of monetary accommodation following geopolitical relief. The bank sector's participation signals confidence in domestic economic resilience and risk appetite normalization.

Oil price compression from perceived diplomatic progress is significant because it reduces inflation expectations and narrows the case for aggressive central bank tightening. This mechanics typically supports equity multiple expansion in cyclical sectors—precisely where the ASX's resource and financial heavyweights are concentrated.

Sector implication: The rally's composition (materials, financials leading) indicates a risk-on rotation rather than defensive repositioning. Sustained momentum depends on whether the deal narrative hardens into concrete agreements; any reversion to tensions would likely unwind the relief trade and expose equity valuations to renewed commodity and inflation scrutiny.