Oil prices tumbled more than 5% and global stock markets surged on Monday after the US and Iran agreed a framework deal to end the war, with US President Donald Trump confirming the key Strait of Hormuz shipping route would reopen.
Brent crude, the global oil benchmark, dropped to $82.84 a barrel, while wholesale gas prices fell about 6%. The slump from a peak of $126 a barrel during the conflict – which began with US and Israeli airstrikes on Iran on 28 February – has raised hopes that the global economy may avoid the worst-case consequences predicted in the early days of the war.
“Oil prices tumbled more than 5% and global stocks surged after the US and Iran agreed a framework deal to reopen the Strait of Hormuz.”
“Let the oil flow!” Trump posted on social media. Iran’s deputy foreign minister, Kazem Gharibabadi, confirmed on state TV that a deal had been finalised. Pakistan, which mediated the talks, said an official signing ceremony would be held on Friday, 19 June in Switzerland.
But Vandana Hari, from energy markets analysis firm Vanda Insights, warned that a lack of detail on what has been agreed was “likely to inject unease and uncertainty into the market”, predicting a week of volatility for oil markets.
Asian stock markets led the rally, with Japan’s Nikkei 225 closing 5% higher and South Korea’s Kospi up 5.2%. In Europe, Germany’s Dax rose 1.2% and France’s Cac 40 added 0.7%, though London’s FTSE 100 slipped 0.4% as shares in energy giants BP and Shell dropped. US markets started strongly, with the Dow Jones up 1% and the S&P 500 1.6% higher, while the tech-heavy Nasdaq, boosted by SpaceX’s blockbuster debut, gained 2.5%.
The deal comes weeks before the oil market was forecast to enter a “red zone”, where soaring summer demand would collide with fast-depleting crude stockpiles. Despite the sharp fall, prices may remain between $80 and $90 a barrel for the rest of the year as buyers race to refill emergency reserves, analysts said.
Bjarne Schieldrop, chief commodities analyst at SEB, noted that for Trump, who faces midterm elections later this year, the deal must be sold as a victory at home. “Lower gasoline price and maybe US Republicans survive the midterm elections,” he said. For Iran, Schieldrop added, a gradual reopening “is tactically preferable” to prevent governments from restocking too quickly and allowing Tehran to maintain leverage.
According to Trump, the strait will be reopened “for purposes of mine removal” after Friday’s signing, a process that could take up to seven weeks during a 60-day negotiation period over Iran’s nuclear phaseout. Meanwhile, the Financial Times reported that the Trump administration is considering a $300bn fund for Iran, tied to Tehran’s “performance” on the deal, including the reopening of Hormuz and nuclear talks.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said global equity markets were “firmly on the front foot” on Monday, adding that the framework deal had “given investors a clear re…” – but questions remain over whether the détente can hold long enough to stabilise energy markets.