Worldwide stock rally follows oil price drop

WASHINGTON: Oil prices fell sharply and stock markets around the world advanced on Monday after the United States and Iran announced an agreement to reopen the Strait of Hormuz, lifting expectations that a conflict which had unsettled energy markets and added to inflation pressures globally could move towards a durable settlement.

Markets reacted positively to the prospect of lower geopolitical risk, although uncertainty remained because the agreement still requires formal signing in Switzerland on Friday. The framework includes the reopening of the strategically important Strait of Hormuz, a major route for global oil shipments. Iran confirmed the framework, but said implementation would begin only after the accord is formally signed.

Brent crude dropped 4.8% to $83.14 a barrel, a notable retreat from levels above $100 seen only a few weeks ago. Even though oil remains costlier than it was before the conflict began more than three months ago, the decline eased concerns over higher fuel, transport and food prices.

Wall Street and global markets advance

In the United States, the benchmark S&P 500 rose 1.9%, while the Dow Jones Industrial Average added more than 700 points, or 1.4%. The Nasdaq Composite climbed 3%, helped by strong gains in artificial intelligence and semiconductor shares.

Companies seen as particularly sensitive to fuel costs were among the leading gainers. United Airlines rose 4.7%, American Airlines gained 3.3%, and cruise operator Carnival advanced 3.6%. Technology shares also posted strong gains during the session.

In Asia, Japan's Nikkei 225 jumped 5% to a record high. European stock markets also recorded broad gains as investors responded to the easing in oil prices and signs of lower regional tensions.

Bond market reflects easing inflation concerns

Bond markets also pointed to improved investor confidence. US Treasury yields edged lower as traders assessed that softer energy prices could help reduce inflationary pressure.

The market response reflected hopes that reopening the Strait of Hormuz could restore a key artery for oil supplies and reduce some of the strain that the conflict had placed on global energy markets. Investors nevertheless continued to watch the process closely ahead of the planned formal signing later this week.