Questions surrounding Iran's nuclear ambitions, among other sensitive matters, are expected to be left for subsequent negotiations
Spencer Platt / Getty Images
Global markets rallied and oil prices fell to their lowest level in about three months on Monday following a preliminary U.S. peace deal with Iran that would reopen the Strait of Hormuz. A 607-point advance, equal to a 1.2% gain, carried the Dow Jones Industrial Average to a fresh all-time intraday peak. Broader indexes also posted strong gains, with the S&P 500 up 1.3% and the Nasdaq $NDAQ Composite finishing 2.2% higher.
WTI crude settled at $79.72 a barrel, a 6% decline. August Brent futures closed at $82.74 a barrel after shedding more than 5% — a level not seen since early March and roughly 30% below the $119.50 peak Brent reached during the height of the conflict. European natural-gas prices also fell.
International equity markets moved sharply higher. The gains were broad-based across Asia and Europe: South Korea's Kospi advanced 5.2%, Tokyo's Nikkei 225 rose 5% to set a record intraday mark, and the pan-European Stoxx 600 added 0.6%.
In a Sunday social-media post, Trump declared the agreement complete and authorized the reopening of the waterway. "The Deal with the Islamic Republic of Iran is now complete," he wrote, adding that he was authorizing "the toll free opening of the Strait of Hormuz" and "the immediate removal of the United States Naval blockade." Vice President JD Vance told CNBC on Monday that he expects the strait to remain open "in a toll-free way for the long term."
Pakistani Prime Minister Shehbaz Sharif indicated the formal memorandum of understanding is set to be signed in Switzerland on Friday. Much remains unresolved: questions surrounding Iran's nuclear ambitions, among other sensitive matters, are expected to be left for subsequent negotiations, according to The Wall Street Journal.
The Strait of Hormuz carries roughly one-fifth of the world's seaborne oil and liquefied natural gas. Iran had largely closed the passage since hostilities began, pushing energy prices higher across global markets. Oil prices had already begun retreating in the weeks prior as Trump repeatedly signaled progress toward a diplomatic resolution; on Friday, draft agreement details published by Iranian state media sent WTI crude down 2.5% to $85.47 a barrel and Brent 2.2% lower to $88.40.
The drop in energy costs offered relief on the inflation front, sending government bond yields down globally; in the U.S., market pricing shifted to reflect reduced odds of a rate hike before year-end. Attention this week will also turn to Kevin Warsh's debut as Federal Reserve chair, with his first rate-setting meeting on the calendar; although no change to borrowing costs is anticipated, investors are keen to gauge his stance on inflation and his approach to leading the central bank.
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