Global oil prices have fallen to a three-month low and stock markets have rallied after the United States and Iran agreed a peace deal to reopen the Strait of Hormuz. The price of Brent crude dropped 5% to below $83 a barrel, while wholesale gas prices fell 6% in Europe.
On Wall Street, the Dow Jones industrial average rose by 1% to hit a new record high of 51,857 points, surpassing its previous peak set in early June. The Russell 2000 index of small US companies also hit a new high, rising by 1.5%. Investors welcomed the news that Washington and Tehran had reached a preliminary agreement, with aerospace manufacturer Boeing leading the risers.
President Trump posted on social media: 'Ships of the World, start your engines. Let the oil flow!' Iran confirmed a memorandum of understanding had been finalised and said the war would end permanently and immediately on all fronts. The deal is expected to be signed in Switzerland after the G7 leaders' conference in France.
However, Britain's FTSE 100 share index closed 41 points lower at 10,430 points, down 0.4%, missing out on the relief rally. Defence firm BAE Systems led the fallers, down 4.7%, amid hopes of a sustained end to hostilities, followed by oil and gas producer Shell, down 4.3%.
Experts have warned that a return to pre-crisis normality is months away and relies on the cooperation of the Iranian regime. The International Monetary Fund has declared it remains on 'high alert' for economic damage caused by the Iran war, though managing director Kristalina Georgieva said the global economy appears to be holding up.
