- Brent crude fell more than 4 per cent after the US and Iran announced a framework agreement.
- The Strait of Hormuz, a key route for global energy supplies, could reopen within weeks.
- Asian and European stock markets climbed as investors priced in easing geopolitical risks.
Oil prices dropped sharply while stock markets surged after the US and Iran said they had reached a framework agreement that could bring an end to months of conflict and pave the way for the reopening of the Strait of Hormuz.
The development immediately rippled through global energy markets, with Brent crude prices and the Strait of Hormuz once again becoming the focus of investors. The waterway, which handles around 20 per cent of the world's oil and liquefied natural gas shipments, has remained effectively shut since hostilities escalated following US and Israeli strikes on Iran on February 28.
Brent crude, the global benchmark, fell 4.7 per cent to £61.94 ($83.24) a barrel, while US benchmark West Texas Intermediate dropped 4.72 per cent to £60.09 ($80.87). Both contracts reached their lowest levels since March as traders unwound some of the risk premium that had built up during the conflict.
Pakistan, which has acted as a mediator between the two sides, said an official signing ceremony is expected to take place in Switzerland on June 19.
Iranian Deputy Foreign Minister Kazem Gharibabadi reportedly confirmed on state television that an agreement had been finalised, while President Donald Trump signalled support for the arrangement in a social media post, saying "let the oil flow".
Markets breathe a sigh of relief
The prospect of renewed shipping through the Strait of Hormuz sparked a broad rally across global financial markets.
Japan's Nikkei 225 climbed 5 per cent to a record closing high, while South Korea's Kospi gained 5.2 per cent. Australia's S&P/ASX 200 advanced 1.4 per cent and Taiwan's benchmark index rose 2.6 per cent.
European investors also welcomed the news. Germany's DAX and France's CAC 40 both rose around 1.7 per cent, while London's FTSE 100 added 0.6 per cent.
Analysts suggested investors were responding to expectations that lower energy costs could ease pressure on businesses and consumers. Asian economies, in particular, have been vulnerable to higher oil and gas prices because of their dependence on Middle Eastern energy supplies.
Before the conflict began, Brent crude traded at roughly £52 ($70) a barrel. During the height of the war, prices surged to about £89 ($120), reflecting fears of prolonged supply disruptions.
Relief tempered by uncertainty
Despite the market optimism, some analysts cautioned that significant questions remain unanswered.
Vandana Hari, founder of Vanda Insights, reportedly said the lack of detailed information about the agreement could create uncertainty in the coming days. She suggested markets may remain volatile until investors have a clearer understanding of how and when the deal will be implemented.
Iran's semi-official Mehr news agency reportedly said the draft agreement includes provisions for the Strait of Hormuz to reopen within 30 days under arrangements determined by Tehran.
However, energy experts have warned that shipping volumes are unlikely to return immediately to pre-war levels. The region has lost millions of barrels of oil production and exports during more than three months of disruption, and restoring normal trade flows could take time.
For now, markets appear to be betting that diplomacy is replacing confrontation. Whether that optimism holds may depend on what emerges from the formal signing process and how quickly one of the world's most important energy routes returns to full operation.
