By David Akinadewo-Adekahunsi

Global financial markets rallied on Monday as oil prices plunged following the announcement of a breakthrough agreement between the United States and Iran to end months of hostilities and reopen the strategically important Strait of Hormuz.

The development sparked optimism among investors worldwide, easing fears of a prolonged conflict that had threatened global energy supplies and heightened concerns about inflation.

According to reports, both Washington and Tehran confirmed that a deal had been reached after mediation efforts by Pakistan, with a formal signing ceremony scheduled for June 19 in Switzerland.

The agreement is expected to bring to an end nearly three months of conflict that disrupted global oil markets and triggered concerns about economic stability.

The Strait of Hormuz, through which about 20 per cent of the world’s crude oil supply passes daily, was effectively shut down by Iran following military strikes involving the United States and Israel at the onset of the conflict.

The closure had sent oil prices soaring above $110 per barrel and reignited fears of another wave of global inflation.

Announcing the breakthrough, United States President Donald Trump said the agreement had been concluded and authorised the immediate reopening of the strategic waterway.

“The Deal with the Islamic Republic of Iran is now complete,” Trump wrote on social media.

“I hereby fully authorise the toll-free opening of the Strait of Hormuz. Ships of the world, start your engines. Let the oil flow!”

Iran’s Deputy Foreign Minister, Kazem Gharibabadi, also confirmed the agreement, saying it marked an immediate end to the war, while discussions on a final settlement would continue over the next two months.

Although details of the agreement were yet to be fully disclosed, financial markets responded positively to the announcement.

Crude oil prices tumbled by more than five per cent, with the United States benchmark, West Texas Intermediate (WTI), falling to about $83.26 per barrel.

The sharp decline in energy prices helped calm concerns that central banks might be forced to resume aggressive interest rate hikes to combat inflation.

Analysts noted that falling oil prices could reduce inflationary pressures and support economic growth across major economies.

Stephen Innes of SPI Asset Management said the market reaction reflected a shift from fears associated with war to renewed confidence in economic reopening.

“Oil down takes the inflation impulse down. Lower inflation risk takes some of the Federal Reserve hike premium out of the curve. Lower yields give duration and growth equities room to breathe,” he said.

He added that the US dollar also weakened slightly as investors moved away from safe-haven assets.

Despite the positive market reaction, some analysts cautioned that the durability of the agreement would depend on the details of the negotiated terms and the willingness of both parties to honour their commitments.

Michael Wan of MUFG said while the development was encouraging for the global economy, investors would closely monitor implementation of the agreement and the next stages of negotiations.

Stock markets across Asia and Europe responded enthusiastically to the news.

Japan’s Nikkei 225 index surged five per cent to close at 69,317.50 points, while South Korean equities recorded similar gains, buoyed by strong demand for technology stocks.

China’s Shanghai Composite Index rose 1.6 per cent, Singapore advanced more than one per cent, while Hong Kong’s Hang Seng Index gained 0.7 per cent.

European markets also opened strongly, with London’s FTSE 100 rising 0.8 per cent, while Paris and Frankfurt recorded notable gains.

Indonesia’s Jakarta Composite Index jumped more than four per cent as lower oil prices strengthened investor confidence and supported the country’s currency.

The Indonesian rupiah appreciated significantly against the US dollar, reaching its strongest level in several weeks.

Market participants are now expected to focus on the formal signing of the agreement in Switzerland, as well as measures to ensure safe navigation through the Strait of Hormuz and the maintenance of regional stability.

The development is widely seen as a significant step towards easing geopolitical tensions in the Middle East and restoring confidence in global energy markets after months of uncertainty.