Global oil prices have tumbled to a three-month low and stock markets closed at a record high amid fresh hopes that a US-Iran peace deal could end the greatest energy supply crisis in market history. The price of Brent crude dropped about 4% to around $83 (£62) a barrel on Monday, driven by optimism that the Strait of Hormuz could reopen shortly, restoring Gulf oil exports. Wholesale gas prices in Europe fell 6%.
Stock markets rallied, with the Dow Jones rising about 1% to a record high as investors welcomed news of a preliminary agreement between Washington and Tehran. The Russell 2000 index of small US companies also hit a new high, rising about 0.8%. In Europe, the UK's FTSE 100 opened up 0.8% before easing, while France's Cac 40 and Germany's Dax rose over 1%. Shares in oil companies such as BP and Shell fell sharply.
US President Donald Trump announced on social media: '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!' He later clarified that the strait would open after the peace deal is signed on Friday, with oil flowing 'on both ends again for the Region, and the World!'
Many details of the agreement remain unclear, including the exact timing of the reopening, who will oversee safe passage, and any conditions. Iranian authorities have indicated a 60-day negotiating period for a final deal addressing broader issues such as Tehran's nuclear programme and sanctions relief. The benchmark international oil price extended falls to just over $82 a barrel, its lowest since early March.
Oil prices began tumbling late last week from $93 a barrel on Thursday to close at $87.50 on Friday after Trump said he was close to a peace deal. Global stock markets rallied on Monday, with Japan's Nikkei and South Korea's Kospi jumping 5%, and China's CSI 300 rising 1.9%. Trump also claimed the US military had been secretly helping to move millions of barrels of oil a day through the strait in recent weeks to ease global market pressure.
Despite the progress, 38 Japanese-linked vessels remain stranded in the Strait of Hormuz, according to the Japanese Shipowners' Association, which said it would wait for more concrete information before acting. The world's oil supply shortfall has been narrowed by record emergency releases from the International Energy Agency and reduced demand, particularly from China, which has cut imports by about 4m barrels a day.
