Brent crude plunged 4% to below $84 a barrel on Monday, its lowest level in three months, after the US and Iran agreed to an interim deal to end hostilities and reopen the Strait of Hormuz. Asian-Pacific markets led a global relief rally, with stocks and bonds climbing sharply as investors priced in the return of Gulf oil exports. The agreement, announced over the weekend, envisions the waterway reopening upon the formal signing of the deal this Friday.
President Donald Trump posted “Let the oil flow” as the news broke, underscoring the administration’s focus on ending what analysts have called the greatest energy supply crisis in market history. The accord also triggers 60 days of negotiations on Iran’s nuclear program, adding a diplomatic dimension to what has been a purely military confrontation. The Financial Times noted that the deal comes alongside a historic initial public offering from SpaceX, further buoying investor sentiment.
The rally extended across equities and fixed income, with Bloomberg reporting broad gains in US and European indices as the so-called “peace trade” took hold. The drop in crude prices lifted airline and transportation stocks, while energy sector shares slid. Bond yields fell as safe-haven demand eased, with traders now turning their attention to the new Fed chair Kevin Warsh’s first rate decision later this week.
Sam Riggall, CEO of Sunrise Energy Metals, pointed to the G7 summit as a forum for discussing rare-earth supply chains, though the dominant market narrative remains the oil price collapse and its disinflationary implications. Skeptics note that the deal is interim and that the 60-day nuclear talks could collapse, potentially reversing the reopening of the strait and snapping crude back above $100.