Brent Crude Falls, Asian Stocks Surge on Hopes of US-Iran Peace Deal and Strait of Hormuz Reopening

Oil prices have slumped while Asian stock markets have climbed, as investors react to signs of progress towards a deal that could end the US-Israel war with Iran and reopen key shipping routes in the Gulf.

Oil Prices Fall Sharply as Asian Markets Rally on Hopes of Gulf Shipping Recovery

By Monday morning trading in Asia, global benchmark Brent crude has dropped 5.5% to $97.90 (£72.64) a barrel, while US-traded crude has fallen 5.8% to $90.99, easing some recent pressure on import-dependent economies.

The Nikkei 225 index in Japan has gained 2.9% and moved above 65,000 for the first time, with investors encouraged by hopes that the Strait of Hormuz will reopen soon, which would help energy-reliant countries such as Japan and South Korea.

The Strait of Hormuz, a narrow waterway vital for global trade, usually carries about one fifth of the world’s oil and liquefied natural gas, but it has been effectively shut since the conflict began on 28 February, hitting major buyers across Asia.

Trump Signals Progress on Iran Deal as Strait of Hormuz Reopening Talks Intensify

Donald Trump has linked the potential agreement with Iran to the reopening of the Strait of Hormuz, previously saying the deal would include restoring traffic through the route, although Trump has not provided further public details about how shipping would restart safely.

On Saturday, Trump wrote on social media that there had been a "very good call" with leaders of Saudi Arabia, the United Arab Emirates, Qatar, "and others" about a "Memorandum of Understanding pertaining to PEACE", signalling increased diplomatic activity among regional powers.

Trump also stated: "An agreement has been largely negotiated, subject to finalization between the United States of America, the Islamic Republic of Iran, and the various other Countries, as listed," adding that "Final aspects and details of the deal are currently being discussed, and will be announced shortly."

Trump said a separate conversation with Israeli Prime Minister Benjamin Netanyahu "went very well", and has repeatedly argued that any settlement with Tehran would "absolutely" stop Iran from acquiring a nuclear weapon, although Trump has not yet set out verification measures.

On Truth Social on Sunday, Trump urged caution, writing: "Both sides must take their time and get it right. There can be no mistakes!" suggesting that negotiators are still working through difficult issues despite earlier comments that an agreement was largely in place.

Iranian foreign ministry spokesman Esmaeil Baqaei told state television that positions held by Washington and Tehran had moved closer over the previous week, but warned that this did not guarantee deals on the most sensitive matters and accused US officials of making "contradictory statements".

Global energy prices have been volatile since early March, after Iran threatened to attack vessels attempting to use the Strait of Hormuz in response to US and Israeli attacks on Iranian targets, adding security risks to an already tight oil market.

Tehran has also launched strikes against Israel and states aligned with the US in the Gulf, including Saudi Arabia, Bahrain and the United Arab Emirates, further raising concerns about supply disruptions and insurance costs for shipping in the region.

Although Brent has dropped sharply on the latest peace hopes, prices are still well above levels seen before the war, when the benchmark traded near $70 a barrel, underlining how much the conflict has altered expectations for supply and stockpiles.

A ceasefire was agreed in early April, and since then officials from Washington and Tehran have been engaged in talks aimed at securing a longer-term peace deal, which could eventually restore energy flows and reduce geopolitical risk for traders.