Global equity markets climbed and oil prices recorded some of their steepest single-day declines in weeks on Monday after President Donald Trump said talks to end the war with Iran were advancing and regional officials described the outlines of a potential deal. The moves extended a pattern that has defined markets since the conflict began: diplomatic signals toward resolution have repeatedly driven oil lower and equities higher, while breakdowns in talks have produced sharp reversals.
Trump said negotiations were “proceeding in an orderly and constructive manner” without providing additional detail. Separately, regional officials told The Associated Press on Sunday that the United States is close to reaching an agreement with Iran that would end the war, reopen the Strait of Hormuz, and see Iran relinquish its stockpile of highly enriched uranium, with the specific details and timelines to be negotiated later. Neither the White House nor Iranian officials have publicly confirmed the contours of a deal on the record.
The Strait of Hormuz has been closed to oil tanker traffic since the war began, bottling up crude exports from the Persian Gulf and forcing major importers — including Japan, which imports nearly all of its oil, most of it through the strait — to secure alternative and more expensive supply. The prospect of its reopening triggered an immediate repricing across commodity markets. Benchmark U.S. crude oil fell $4.77, or more than 4%, to $91.83 a barrel. Brent crude, the international standard, dropped $4.86 to $98.68 a barrel.
Equity markets across Asia and Europe posted broad gains in response. Japan’s Nikkei 225 surged 2.9% to 65,158.19, the largest single-session advance among major indices. Germany’s DAX rose 1.0% to 25,148.39 and France’s CAC 40 gained 1.1% to 8,203.32. Britain’s FTSE 100 added 0.2%. In Asia, Australia’s S&P/ASX 200 rose 0.4% and the Shanghai Composite gained nearly 1%. Trading was closed in the United States for the Memorial Day holiday, as well as in South Korea and Hong Kong for holidays marking Buddha’s birthday.
“Markets are rapidly transitioning from pricing geopolitical fear toward pricing a potential peace dividend as Hormuz reopening expectations pressure oil and the dollar lower,” Stephen Innes, managing partner at SPI Asset Management, said in a commentary.
The U.S. dollar weakened against major currencies, declining to 158.95 Japanese yen from 159.16 yen, while the euro rose to $1.1644 from $1.1605. On Friday, the last U.S. trading session before the holiday, the S&P 500 added 0.4%, the Dow Jones Industrial Average climbed 0.6%, and the Nasdaq composite gained 0.2%.
The market moves mark at least the fourth major oil-price pivot tied to Iran war diplomacy in as many months. Investors have tracked the talks closely since the conflict began, with oil prices spiking on reports of stalled negotiations or escalation in the strait and falling sharply on signs of progress toward a ceasefire or permanent resolution. Monday’s $4-plus drop in crude futures was the largest single-day decline since the last major diplomatic advance in mid-April.
Recent U.S. corporate earnings reports that exceeded analysts’ expectations have provided additional support to equity markets, though concerns about inflation have risen as the war has dragged on and kept energy costs elevated. The core Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation gauge, registered a year-over-year increase of 3.2% as of the latest available data, according to the St. Louis Fed’s FRED database — still above the central bank’s 2% target. A durable end to the conflict and a sustained reopening of the Strait of Hormuz would remove one of the largest remaining supply-side pressures on global inflation.