Asian Markets Rally After US-Iran Peace Deal
Asian markets welcomed the news of a peace deal between the United States and Iran. Global oil prices plunged after US President Donald Trump announced that the two nations had finalised an agreement to reopen the Strait of Hormuz.
Investors across the region responded enthusiastically to the geopolitical development. South Korea’s Kospi index soared 5.1%, leading gains in the region. Japan’s Nikkei 225 rose 3.6%, while the broader Topix index gained 2.6%. In Australia, the S&P/ASX 200 recorded a 1.3% increase.
US crude oil futures for July delivery fell 4.77% to US$80.83 per barrel, while Brent futures, the international benchmark, for August delivery traded around 4% lower at US$83.77 per barrel.
"The deal with the Islamic Republic of Iran is now complete," Trump said in a post on Truth Social. He stated that the Strait of Hormuz would be opened without a toll system and that the US would end its naval blockade of Iran. "Ships of the world, fire up your engines. Let the oil flow!" Trump added.
In a subsequent post, Trump said the strait would be opened on Friday, when the official peace agreement signing ceremony is scheduled to take place in Switzerland. "With the opening of the Strait of Hormuz after the signing of the Agreement on Friday, for the purpose of mine clearing, oil will flow back at both ends for the region, and the world!" he said.
Approximately 20% of the world’s oil supply passes through the Strait of Hormuz, before tanker traffic plummeted in early March due to Iranian attacks. The disruption triggered the largest oil supply shock in history.
Pakistani Prime Minister Shehbaz Sharif, who acted as a mediator between the United States and Iran, said both nations had announced an immediate and permanent cessation of military operations on all fronts, including in Lebanon. "We would like to thank the United States and the Islamic Republic of Iran for their commitment to finding a diplomatic solution to this conflict," Sharif said. Mediators will facilitate a meeting this week to lay the groundwork for technical talks and the official signing ceremony.
Meanwhile, the chief executive of oil tanker firm Frontline said he expected traffic through the Strait of Hormuz to recover quickly if a credible agreement is reached. "I am actually very optimistic that once the situation improves and the US and Iran reach an agreement, at least not to attack ships, traffic will resume immediately," Frontline CEO Lars Barstad told CNBC.