Oil prices have tumbled and global stock markets surged after the US and Iran agreed a framework deal to end their war, with Donald Trump confirming the reopening of the Strait of Hormuz. Brent crude, the international benchmark, dropped more than 5% to $82.84 a barrel, while wholesale gas prices fell about 6%, according to energy analysts. The strait, through which around 20% of the world’s oil and liquefied natural gas normally passes, has been effectively closed since 28 February when the US and Israel launched airstrikes on Iran. Tehran had threatened to attack vessels using the waterway, triggering the greatest recorded disruption to global energy supplies in more than 100 days.
Asian stock markets led the rally on Monday, with Japan’s Nikkei 225 closing 5% higher and South Korea’s Kospi ending up 5.2%. The region had been hit particularly hard by higher energy prices due to its reliance on Middle Eastern oil and gas. In Europe, Germany’s Dax rose 1.2% and France’s Cac 40 added 0.7%, while London’s FTSE 100 slipped 0.4% as shares in BP and Shell dropped on the lower oil price. US markets opened 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%.
“Oil prices plummeted and global markets rallied after US and Iran agreed to reopen the Strait of Hormuz.”
The deal, mediated by Pakistan, will be formally signed on Friday 19 June in Switzerland. Iran’s deputy foreign minister Kazem Gharibabadi confirmed on state TV that a deal had been finalised, and Trump posted on social media: “let the oil flow!”. But Vandana Hari from energy 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”, potentially leading to a week of volatility.
Despite the sharp fall in prices, analysts caution that a return to pre-crisis normality is months away. Bjarne Schieldrop, chief commodities analyst at SEB, said a gradual reopening of the strait is “tactically preferable” for Iran, allowing Tehran to maintain political leverage. Minesweeping operations, necessary before tankers can pass safely, could take up to seven weeks, and buyers are expected to race to refill depleted emergency crude stockpiles. Market observers believe oil prices may remain between $80 and $90 a barrel for the rest of the year. The deal also raises the likelihood that the US Federal Reserve will leave interest rates on hold when it meets on Wednesday, as the conflict had pushed up energy bills and inflation. For Trump, facing midterm elections later this year, the agreement offers a potential political victory if it lowers gasoline prices through the summer driving season.