Israel and Lebanon announce ceasefire, reviving peace hopesBut oil and dollar only marginally lower as caution prevailsYen struggles near 160 per dollar despite Ueda’s hawkish tiltWall Street snaps winning streak; more losses likely as Broadcom misses guidanceMiddle East Tensions Cool After Flare-UpRisk sentiment is recovering slightly on Thursday, although not by much, after a ceasefire agreement between Israel and Lebanon eased fears of a further escalation following the latest flareup. Iran carried out fresh missile and drone attacks on US targets in Kuwait and Bahrain on Wednesday after American forces hit an Iranian tanker and a military base on Qeshm Island.The exchange of fire was thought to be the largest since April’s ceasefire, but diplomatic efforts continue, with the Israel-Lebanon deal providing a much-needed boost to peace hopes, as talks between the US and Iran drag on. President Trump remains upbeat about the prospect of a deal by the weekend.However, even as Washington and Tehran have made some progress in ironing out their differences, the situation in Lebanon remains a major sticking point, with Iran insisting that any deal must include a complete withdrawal of Israeli troops from Lebanon. However, Trump seems to be pushing to separate the two issues in the talks and it’s unclear if Iran will accept this. Oil Prices Retreat From Latest SpikeInvestors remain sceptical about immediate deal prospects, having been disappointed several times over the past few weeks. Yet, neither are they too worried about a return to full-scale hostilities, as reports suggest Trump is not interested in resuming an all-out war with Iran, leading to a spat with his ally Israeli Prime Minister Benjamin Netanyahu.This is probably keeping oil prices below $100 a barrel, although equally, there is reluctance to push the price too far below this critical mark. WTI and Brent crude futures have slipped by about 1% today, erasing most of yesterday’s gains.In the meantime, the US House of Representatives passed a resolution to end the war in Iran, signalling unease among lawmakers about the impact higher inflation is having on Americans. However, the vote is symbolic in nature and the Senate is unlikely to pass it, at least not whilst the negotiations are ongoing, as taking the military option off the table would weaken Washington’s negotiating hand during the talks.Solid US Data Continue to Support the DollarThe US dollar also fell back slightly on Thursday, easing from near two-month highs against a basket of currencies. Aside from the growing doubts about how quickly the US and Iran will be able to negotiate a deal at permanently ending the war, strong US data is also supporting the dollar.The ISM services PMI rose more than expected in May, with all sub-components apart from employment gaining from April levels. The price index hit a four-year high, raising fresh concerns about brewing inflationary pressures. Also beating expectations were April factory orders and the ADP private employment survey. The focus today will be on the weekly jobless claims and the Challenger Layoffs for May, which will be the last jobs jigsaw in the puzzle before Friday’s all-important payrolls report.Despite the resilience of the US economy during the energy crisis and the recent hawkish Fedspeak, year-end expectations for a Fed rate hike have been creeping up very slowly since May when it became apparent that the war isn’t about to end soon.Investors have yet to hear new chair Kevin Warsh’s views and this is helping to keep a lid on the more hawkish bets and potentially offering some relief to gold.The precious metal is recovering slightly after hitting a low of $4,422 earlier in the day, but gold remains largely in a sideways channel amid the Middle East stalemate. Yen Slightly Firmer Amid Intervention RisksThe Japanese yen isn’t having the best of time either, as hawkish remarks by Bank of Japan Governor Ueda and intervention warnings by government officials have failed to drive it significantly higher. Nevertheless, the yen is having its first positive day in five against the greenback after swinging sharply yesterday on Ueda’s June rate hike hints and as investors got nervous after coming close to the 160 level several times before finally pushing it above the critical intervention mark.The dollar is currently trading just below 159.90 yen and although it cannot be ruled out, it’s unlikely that officials intervened.AI Rally Takes a Pause as Broadcom DisappointsIn equity markets, overnight losses on Wall Street pushed Asian stocks lower. But the mood seems to have improved in Europe where most indices are trading higher.US stock futures are also mixed. Notably, Nasdaq futures are struggling the most after Broadcom slumped by around 13% in after-hours trading. Although earnings per share beat expectations, the AI chipmaker disappointed investors with its Q2 revenue as well as its guidance for Q3 revenue.Although the flare-up in the Middle East dented sentiment on Wall Street, some profit-taking was well overdue following nine straight sessions of gains for both the S&P 500 and Nasdaq Composite.With Elon Musk’s SpaceX (NASDAQ:SPCX) getting ready to enter the stock market, aiming to become the world’s largest IPO, enthusiasm for AI and the broader tech sector isn’t likely to wane anytime soon, though some slowdown in the rally is to be expected.