Global stocks rallied and crude oil prices fell more than 4 percent after former U.S. President Donald Trump said negotiations to end the war with Iran were proceeding in an orderly manner. The potential for a peace deal that could reopen the Strait of Hormuz sent a wave of relief through markets, boosting risk assets while pressuring commodities that had been inflated by a significant geopolitical risk premium.
"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, an analyst, said in a commentary.
The impact was most dramatic in energy markets. Brent crude, the international standard, sank $4.86, or 4.4 percent, to $98.68 a barrel. West Texas Intermediate crude, the U.S. benchmark, dropped 4.61 percent to $92.10. The selloff came on expectations that a deal could restore a significant amount of Iranian oil to the global market, easing tight supply conditions.
The optimism spilled into equity markets across Asia and Europe, while U.S. markets were closed for the Memorial Day holiday. Japan’s Nikkei 225 surged 2.9 percent to close at 65,158.19, its first time above the 65,000 level. Elsewhere in Asia, the Shanghai Composite gained nearly 1 percent and Australia’s S&P/ASX 200 added 0.4 percent. In Europe, Germany’s DAX rose 1.0 percent and France’s CAC 40 added 1.1 percent.
Cryptocurrencies also benefited from the improved sentiment. Bitcoin, the largest digital asset, recovered from a weekend low near $74,000 to trade above $77,000. The broader crypto market added about 0.2 percent in 24 hours, according to data from BeInCrypto. The move highlights the market's sensitivity to geopolitical developments, which can quickly alter the risk appetite of investors across all asset classes.
This article is for informational purposes only and does not constitute investment advice.
