Oil Falls Below $80 as Markets Rally on Preliminary US-Iran Deal

Global oil prices fell sharply and stock markets climbed on Monday after the United States and Iran reached a preliminary agreement to end their conflict and reopen the Strait of Hormuz. The deal, announced late Sunday by President Donald Trump and mediated by Pakistan, marks a potential end to more than three months of disruption that cut off a key route for roughly one-fifth of world oil supplies.

Brent crude, the international benchmark, dropped more than 4 percent to trade near $83 a barrel, its lowest level since early March. US crude futures slipped below $80 for the first time since then before recovering slightly. The price decline reflected optimism that Gulf exports could resume soon, though analysts noted that restoring full tanker traffic and damaged infrastructure would take time.

Trump described the agreement as complete in a series of social media posts. He authorized the immediate removal of the US naval blockade and said the strait would open without tolls once the formal deal is signed on Friday in Switzerland. Pakistani Prime Minister Shehbaz Sharif, who helped broker the talks, said both sides had agreed to an immediate and permanent halt to military operations, including in Lebanon. He added that technical discussions would begin this week ahead of the signing.

The framework leaves several major issues unresolved. Iranian officials indicated a 60-day period of further negotiations would address Tehran’s nuclear program and sanctions relief. Details on oversight of safe passage through the strait and any conditions attached to the reopening remain unclear. Those gaps have left some tanker operators cautious even as futures prices reacted positively.

Asian markets opened higher on the news. Japan’s Nikkei 225 rose more than 5 percent in early trading, while South Korea’s Kospi gained as much as 5.7 percent. European indexes also advanced, with Germany’s DAX and France’s CAC 40 each up more than 1.5 percent. US stock futures pointed to a strong open, led by technology shares, as lower energy costs eased pressure on airlines and other fuel-sensitive sectors.

The Hormuz closure had produced the largest oil supply shock in decades, pushing prices above $90 a barrel at times and contributing to volatility across global markets. Monday’s relief rally followed several days of building expectations after Trump signaled progress in the indirect talks. Still, market participants emphasized that any lasting recovery in supply would depend on the durability of the agreement once broader talks begin.

The Federal Reserve’s policy decision later this week now takes on added significance, with investors watching whether lower oil prices alter the inflation outlook. For now, the immediate effect has been a clear shift in sentiment toward risk assets and away from energy.