Global stock markets saw a surge on Monday following the announcement of a potential agreement between the United States and Iran to extend their ceasefire and reopen the Strait of Hormuz, aiming to restore the global flow of crude oil. The S&P 500 surged by 1.7%, the Dow Jones Industrial Average climbed 0.9%, and the Nasdaq composite rose by 3.1%.
Canada’s main stock market index, the TSX/S&P composite index, also experienced a gain of about one percent during the day. The rally in stocks was further supported by a 4.8% drop in the price of a barrel of Brent crude oil, which settled at $83.17 US, returning to levels seen in early March.
Although still higher than pre-war prices of around $70, the current price decrease from over $100 in recent weeks is seen as a positive development. Lower oil prices are expected to alleviate financial pressure on households and businesses that have been grappling with increased costs due to the supply disruptions caused by the conflict with Iran.
While Iran confirmed its tentative agreement, the implementation is set to begin after a signing scheduled for Friday in Switzerland. However, broader negotiations, particularly regarding Iran’s nuclear program, are anticipated to continue over the next 60 days, leaving room for potential challenges that could hinder the agreement’s progress.
Energy experts emphasized the importance of ensuring the stability of the pact before the full resumption of oil and gas supplies through the Strait of Hormuz. The reopening of the strait is anticipated to take time, with the energy industry requiring several months to return to full operational capacity.
Stocks of companies heavily reliant on oil also experienced gains, with United Airlines and Royal Caribbean Group witnessing notable increases. Additionally, companies in the artificial intelligence sector saw a surge in their stock prices, including SpaceX, which rose by 19.6% on its second day of trading on Wall Street.
The bond market also reacted positively, with treasury yields easing on expectations that lower oil prices could alleviate pressure on central banks to raise interest rates globally. Stock markets across Asia and Europe witnessed gains, with Japan’s Nikkei 225 and South Korea’s Kospi recording substantial increases.
London’s FTSE 100, however, experienced a slight decline of 0.4%. Overall, the positive market sentiment was driven by the prospects of easing tensions in the Middle East and the positive impact of lower oil prices on financial markets worldwide.
