Global stocks rallied and oil tumbled after the U.S.-Iran peace deal reopened the Strait of Hormuz. Investors now turn to the Fed, BOJ and RBA for the next catalyst.
Global stocks rose and crude tumbled Monday after the U.S. and Iran announced a peace agreement that reopened the Strait of Hormuz to commercial shipping. The deal removed the threat of a blockade that had added a risk premium to oil prices for months.
West Texas Intermediate crude fell sharply in early trading. Brent crude followed. The move erased gains built up since mid-February when tensions first escalated. Tanker tracking data showed the first vessels already moving through the strait, according to ship-position reports.
Equity indexes across Asia, Europe and the U.S. gained. The S&P 500 opened up more than 1%. Export-oriented sectors in Japan and South Korea led the advance. The rally extended a week of gains driven by the same news flow after President Trump said earlier this month that a deal was close.
Oil Slumps 3% as Trump Says Iran Deal Reopens Hormuz Oil Tumbles 5% After Trump Says U.S., Iran Reach Hormuz Deal
The strait carries about 20 million barrels of crude and petroleum products daily. A blockade would have forced ships to reroute, adding weeks to transit times and raising insurance costs. The deal removes that bottleneck. Refiners in Asia and Europe, which rely on Middle Eastern crude, stand to benefit most from lower input costs.
Investors now shift focus to central bank meetings. The Federal Reserve, Bank of Japan and Reserve Bank of Australia all hold policy decisions this week. The BOJ is expected to hold rates steady while the Fed may signal its next move on inflation. The RBA meets Tuesday; markets price no change.
The agreement also lifted currencies tied to oil imports. The Japanese yen strengthened. The Indian rupee, which had hit a series of lows on import-cost concerns, firmed.
Gold fell slightly as risk appetite improved. Safe-haven flows reversed. Gold earlier this month had tested $2,050 on the Hormuz tensions. The metal gave back roughly half that gain.
Traders will watch the first full week of post-deal shipping data to confirm that transit times normalize and insurance premiums drop. The next scheduled update from the Joint Shipping Advisory Board comes Thursday.
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