NEW YORK: Oil prices dropped towards US$80 a barrel and stocks rallied Monday (Jun 15) after Washington and Iran reached a framework deal to end the Middle East war and reopen the Strait of Hormuz, spurring relief across global markets.
The announcement lifted the Dow to a fresh record, while the tech-dominated Nasdaq piled on more than three per cent behind a nearly 20 per cent surge in SpaceX following its impressive market debut Friday.
“A deal to reopen the Strait of Hormuz is sparking a broad rally on Wall Street to start the week,” said a note from Jose Torres of Interactive Brokers. “Risk-on sentiments are thriving … as traders effectively attempt to call an end to the US-Iran military conflict.”
The strait, through which roughly 20 per cent of the world’s crude oil supply normally transits, had been effectively closed by Tehran after the US and Israeli strikes on Iran in late February, sending energy prices soaring.
The peace deal – in fact a “memorandum of understanding” – is due to be sealed with a signing ceremony in Switzerland on Friday, aimed at ending three months of conflict that have revived fears of a prolonged inflation spike.
Crude prices slumped nearly five per cent, having surged above US$110 soon after the conflict began.
Trump administration officials had for weeks teased an impending potential accord. But until Sunday, not only was there no announcement, but last week saw revived strikes between the two sides as Trump threatened a reinforced crackdown.
The US president, soon after arriving in France for a summit hosted by French President Emmanuel Macron, nevertheless basked in the announcement of the deal, saying the strait would “completely open” from Friday.
But the content of the preliminary agreement, which follows weeks of fraught negotiations, remained unclear, with key items such as the future of Iran’s nuclear programme pushed back to a 60-day negotiation.