Global oil prices declined sharply on Monday while equity markets rallied after the United States and Iran announced a breakthrough agreement to end hostilities, easing tensions that had disrupted energy supply routes.
Both countries confirmed the development following mediation by Pakistan, with a formal signing ceremony scheduled to take place in Switzerland on June 19. The agreement is expected to conclude three months of conflict that had driven oil prices higher and raised inflation concerns globally.
A key outcome of the deal is the reopening of the Strait of Hormuz, a strategic shipping corridor responsible for transporting about one-fifth of the world’s crude oil supply, which had been effectively shut during the conflict.
US President Donald Trump confirmed the development, stating that the agreement would allow maritime traffic to resume freely through the route.
Iranian Deputy Foreign Minister Kazem Gharibabadi also indicated that the deal brings an immediate halt to hostilities, with further negotiations expected to produce a comprehensive agreement within two months.
Following the announcement, crude prices dropped by as much as five per cent, with benchmark US oil nearing $83 per barrel, reversing earlier spikes that had pushed prices above $110 at the height of the conflict.
The easing in oil prices has reduced fears of rising inflation, which had previously raised expectations of tighter monetary policy by central banks, including the Federal Reserve.
Market analysts noted that lower energy costs could ease pressure on interest rates and support equities, particularly in growth sectors.
Stock markets across Asia and Europe responded positively, recording significant gains as investor sentiment improved on expectations of reduced geopolitical risk and stabilising energy supplies.
