GLOBAL MARKETS: Shares jump, oil skids in Asia on news of Gulf deal

SYDNEY — Asian share markets surged on Monday while the U.S. dollar weakened and oil prices tumbled, as a tentative peace deal between the United States and Iran raised hopes of easing global inflation pressures and reducing the need for higher interest rates.

Pakistani Prime Minister Shehbaz Sharif said on social media early Monday that an agreement had been reached, while U.S. President Donald Trump said the deal included reopening the strategic Strait of Hormuz, though he did not provide details.

Trump is expected to meet Middle Eastern leaders and attend a working session with Ukrainian President Volodymyr Zelenskiy during this week’s G7 summit in France.

Iran, meanwhile, said traffic through the strait would be regulated jointly by Tehran and Oman, a move that could complicate free trade rules and potentially introduce shipping tolls.

“The lack of details, especially on freedom of shipping, is a concern, but not one that should constrain markets today as the surge in risk appetite plays out,” said Sean Callow, senior FX analyst at ITC Markets. “The prospect of a sustained fall in energy prices changes the conversation for central banks just ahead of a flurry of policy decisions.”

The development comes as a relief for central banks meeting this week, easing pressure to tighten monetary policy to counter energy-driven inflation risks.

Markets had already priced in the likelihood of a deal, but confirmation was enough to trigger a broad rally in risk assets. Brent crude fell 4% to $83.80 per barrel, moving further away from its May peak of $126.41. U.S. crude dropped 4.7% to $80.89 per barrel, though still above pre-conflict levels near $67.

“We see Brent oil futures falling to $80 by the end of the year, assuming the strait does not close again,” said Vivek Dhar, mining and energy analyst at CBA. “Our forecast assumes oil and refined product exports can resume quickly through the Strait of Hormuz, though this outlook carries uncertainty tied to potential damage to energy infrastructure.”

Cheaper oil prospects boosted Asian equities, particularly in energy-importing economies. Japan’s Nikkei index rose 3.0%, while South Korea’s benchmark climbed 4.3%. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.5%.

In Europe, futures pointed higher, with EUROSTOXX 50 and DAX futures both up 0.2%, while FTSE futures added 0.3%. U.S. equity futures also advanced, with S&P 500 futures rising 0.9% and Nasdaq futures jumping 1.5%, reflecting stronger risk sentiment.

Central banks across the globe—including those in the United States, United Kingdom, Japan, Australia, Switzerland, Sweden, Norway, and Russia—are scheduled to meet this week. Japan is widely expected to be the only major economy to raise interest rates.

The U.S. Federal Reserve is expected to hold rates steady at 3.50%–3.75% on Wednesday in what will be Chair Kevin Warsh’s first meeting. Investors will closely watch the statement, economic projections, and press conference for signals on whether policymakers are shifting away from an easing bias amid persistent inflation concerns.

Markets have reduced expectations for rate hikes this year, with December futures edging slightly higher, while the probability of a move as early as October has risen to around 45%.

U.S. Treasury yields fell on expectations that lower oil prices could ease inflation pressures. The yield on the two-year note dropped 6 basis points to 4.02%.

The decline in yields and improved risk appetite also pushed the U.S. dollar lower. The euro rose 0.4% to $1.1608, while the dollar slipped 0.2% against the yen to 159.90. Sterling gained 0.3% to $1.3446.

The Bank of England is expected to keep rates unchanged at 3.75% on Thursday, with policymakers signaling no urgency to tighten policy further through 2026. Attention will focus on the vote split and monetary policy report.

Key UK data releases this week include May inflation, retail sales, and April employment figures. Thursday’s Makerfield election will also be closely watched, with a potential win for Labour Mayor Andy Burnham seen as a possible precursor to a leadership challenge against Prime Minister Keir Starmer.

In commodities, lower yields supported gold prices, with spot gold rising 1.9% to $4,300 per ounce. -Reporting by Wayne Cole; Editing by Edmund Klamann/Reuters