Global markets settled into a more measured tone as the initial excitement over a preliminary U.S.-Iran peace deal began to fade.

Wall Street futures diverged, with S&P 500 futures pointing lower, after the Dow and TSX indexes rallied to close at record highs on Monday.

TSX futures were in positive territory.

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U.S. President Donald Trump’s announcement of a deal with Iran drew initial investor relief on Monday, but it also puts Washington on a collision course with Israel.

“While it is an important diplomatic breakthrough that should remove a key source of market volatility, the durability of the deal is likely to be tested in the future,” Westpac analysts wrote in a research note. “Many sticking points, including the fate of Iran’s nuclear program, were left to be resolved in subsequent negotiations.”

Overseas, the pan-European STOXX 600 was up 0.48 per cent in morning trading. Britain’s FTSE 100 gained 0.68 per cent, Germany’s DAX rose 0.65 per cent and France’s CAC 40 advanced 0.80 per cent.

In Asia, Japan’s Nikkeei closed 0.13 per cent higher, while Hong Kong’s Hang Seng finished down 1.40 per cent.

Oil prices slid to fresh three-month lows as markets weighed prospects for a resumption of supplies through the Strait of Hormuz alongside weaker physical demand.

Brent crude futures were down 2 per cent, at US$81.47 a barrel, while U.S. West Texas Intermediate was down 2.3 per cent, at US$78.86.

Reopening of the Strait of Hormuz and winding down the U.S. naval blockade on Iranian ports and vessels is expected to be the more difficult phase of the peace plan, one that will be closely watched by markets, noted Suvro Sarkar, the head of DBS Bank’s energy research. “Anything other than a clean simultaneous unlock will mean renewed volatility in oil prices.”

In other commodities, spot gold was up 0.8 per cent at US$4,341.39 per ounce. U.S. gold futures for August delivery gained 0.3 per cent to US$4,363.00 per ounce.

The Canadian dollar weakened against its U.S. counterpart.

The day range on the loonie was 71.32 US cents to 71.52 US cents in early trading. The Canadian dollar was down about 1.81 per cent against the greenback over the past month.

The U.S. dollar index, which weighs the greenback against a group of currencies, dipped 0.01 per cent to 99.370. The dollar was pegged at $1.3999.

The euro edged up 0.15 per cent to US$1.1608. The British pound climbed 0.08 per cent to US$1.3421.

In bonds, the yield on the U.S. 10-year note was last down at 4.446 per cent.

China retail sales and industrial production

Canadian existing home sales and average prices for May.

8:15 am ET: U.S. ADP employment report

8:30 am ET: U.S. housing starts and building permits for May

8:30 am ET: U.S. import prices for May

With Reuters and The Canadian Press