Oil prices fall to lowest level in months and stocks surge because this time there really is an Iran deal

A barrel of WTI crude for July delivery settled at $79.72, a 6% decline that leaves it approximately one-third below the $119.48 intraday peak it hit during the early days of fighting. August Brent futures closed at $82.74 a barrel after shedding more than 5% on the day — a level not seen since early March and roughly 30% off the $119.50 ceiling Brent reached at the height of the conflict.

U.S. stock futures moved in the opposite direction. The Dow Jones Industrial Average futures contract was up 427 points, or 0.8%; S&P 500 futures added 1.2%; and the Nasdaq $NDAQ-100 futures contract gained 2%. Asian markets posted some of the sharpest rallies globally, with Tokyo's Nikkei 225 closing up 5% at a record and Seoul's Kospi finishing 5.2% higher.

In a Sunday social-media post, President Donald Trump declared the agreement finished and the strait reopened. "The Deal with the Islamic Republic of Iran is now complete," he wrote, adding: "I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!" — and indicated the waterway would not physically reopen until the formal signing takes place Friday. Switzerland will host the formal signing, CNBC reported, citing Pakistani Prime Minister Shehbaz Sharif.

Analysts warned the agreement is not fully settled. Friday's signing is still days away, and contentious questions such as what to do about Iran's nuclear ambitions are widely expected to be set aside for subsequent negotiations.

The Strait of Hormuz carries roughly one-fifth of the world's seaborne oil and liquefied natural gas. Iran had all but closed it since hostilities erupted, driving energy prices higher across global markets. Oil prices had already begun retreating over the prior weeks 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.

Falling crude prices also cooled inflation fears, pulling sovereign bond yields lower around the world; in U.S. markets, rate-rise bets for the remainder of the year were scaled back. Kevin Warsh's debut as Federal Reserve chair will also draw close attention, with CME $CME's FedWatch tool putting the odds of a rate hold at better than 98%.