Cheaper fuel could be on the horizon for the world and South Africa after a peace deal was reached between the US and Iran, which is expected to see the Strait of Hormuz reopening toll-free. The news sent global stocks soaring on Monday, while oil prices tumbled on the news.
The two sides confirmed an announcement brokered by mediator Pakistan, with a signing ceremony scheduled in Switzerland on June 19. The agreement is set to end three months of conflict that had driven energy prices sharply higher and fuelled renewed concerns about a global inflation spike.
The Strait of Hormuz – a key maritime chokepoint responsible for roughly a fifth of global crude oil flows – was effectively shut by Tehran shortly after US-Israeli strikes on Iran began the conflict on February 28.
“The Deal with the Islamic Republic of Iran is now complete,” US President Donald Trump wrote on social media Sunday as he marked his 80th birthday.
“I hereby fully authorise the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade.
“Ships of the World, start your engines. Let the oil flow!”
Iran’s Deputy Foreign Minister Kazem Gharibabadi later said on television that the deal brought an “immediate end” to the war, while noting that negotiations toward a “final agreement” would continue within the next two months.
The deal follows weeks of tense negotiations and repeated warnings from Trump of possible renewed military action if Iran failed to agree, though the full details and final terms of the agreement have not yet been made public.
Crude oil prices fell by as much as five percent on Monday, with Brent crude down by over four percent at around $83.60, while West Texas Intermediate approached $80 a barrel for the first time since the start of March.
Both main contracts have seen significant declines since their initial surge past $110 after the conflict began.
Although fuel price cuts are forecast for July, the full effect of lower oil prices – assuming they hold at current levels or lower – will likely only be felt in March.
The decline in oil prices helped ease fears that persistent inflation could push central banks back into raising interest rates. Recent US data showing higher consumer inflation for May, along with stronger-than-expected job growth, had already increased expectations that the Federal Reserve could tighten policy again before year-end.
According to Stephen Innes of SPI Asset Management, “oil down takes the inflation impulse down,” while lower inflation risks reduce expectations of Fed rate hikes and ease pressure on bond yields, giving both growth stocks and longer-duration assets some breathing room.
He added that “the dollar loses a bit of its wartime bid,” while risk assets such as cryptocurrencies tend to respond quickly to improved liquidity conditions, as markets shift from a crisis-driven defensive stance to a more optimistic, reopening outlook.
However, Innes cautioned that the agreement should not be seen as a final peace settlement.
He said markets would now focus on verification of the deal, including the formal signing in Switzerland, mine clearance efforts, and whether regional actors such as Israel exercise restraint.
He described the arrangement as an early framework for a ceasefire that postpones deeper unresolved issues, including Iranian compliance and the role of Hezbollah.
Asian equity markets surged on the news, with Tokyo and Seoul both rising more than five percent, boosted by strong demand for technology shares following last week’s massive $75 billion initial public offering of Elon Musk’s SpaceX.
In Tokyo, gains were led by SoftBank and major semiconductor-related companies including Tokyo Electron and Advantest, while in Seoul, Samsung Electronics and SK hynix also posted strong advances.
The strong debut of SpaceX, which surged 19 percent and made Musk the world’s first trillionaire, reignited investor enthusiasm for artificial intelligence-linked stocks, a dominant theme behind recent record market gains.
- Key figures around 5am (SA time)
- Brent North Sea Crude: DOWN 4.1 percent at $83.77 a barrel
- Tokyo – Nikkei 225: UP 5.4 percent at 69,593,64 (break)
- Hong Kong – Hang Seng Index: UP 0.5 percent at 24,835.26
- Shanghai – Composite: UP 1.0 percent at 4,071.72
- Euro/dollar: UP at $1.1599 from $1.1577 on Friday
- Pound/dollar: UP at $1.3438 from $1.3416
- Dollar/yen: DOWN at 160.14 yen from 160.23 yen
- Euro/pound: UP at 86.31 pence from 86.27 pence
- New York – Dow: UP 0.7 percent at 51,202.26 (close)
- London – FTSE 100: UP 1.6 percent at 10,471.72 (close)
Source: AFP
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