Global oil prices have plummeted to a three-month low and stock markets rallied after the United States and Iran reached a preliminary peace deal, raising hopes that the Strait of Hormuz will soon reopen. The price of Brent crude dropped 5% to below $83 a barrel, while wholesale gas prices fell 6% in Europe, as investors welcomed the prospect of a return of Gulf oil exports.
Wall Street hit new records, with the Dow Jones Industrial Average rising 1% to an all-time high of 51,857 points, surpassing its previous peak set in early June. The Russell 2000 index of small companies also reached a fresh high, up 1.5%. European markets likewise climbed to record highs earlier in the day, driven by what analysts called “peace optimism”.
However, Britain’s FTSE 100 missed the rally, closing 41 points lower at 10,430, a drop of 0.4%. Defence firm BAE Systems led the fallers, down 4.7%, followed by oil and gas producer Shell, which fell 4.3%. Miners, industrial stocks and financial firms did gain, but losses in energy and defence stocks weighed on the index.
The deal, which President Trump said was “now complete” and would be signed after the G7 leaders conference in France, sees the US authorising the immediate removal of its naval blockade and the toll-free opening of the Strait of Hormuz. Iran confirmed that a memorandum of understanding had been finalised and said the war would end “permanently and immediately on all fronts”.
Experts warned that a return to pre-crisis normality is still months away and relies on Iranian cooperation. Analysts at ABN Amro highlighted sticking points, including uranium enrichment moratoriums, reconstruction costs, and Iran’s desire to levy tolls on the strait. They cautioned that the strait could be closed again if talks falter or if Israel resumes its offensive in Lebanon.
The International Monetary Fund declared it remains on “high alert” for economic damage from the war, but managing director Kristalina Georgieva noted the global economy “appears to be holding up” more than three months after hostilities began.
