Global stocks soar and oil prices drop as U.S., Iran reach tentative deal to end war

Global stock prices soared Monday after a tentative deal was announced on ending the Iran war and reopening the Strait of Hormuz, while oil prices fell more than $4 US a barrel.

The future for the S&P 500 was up 1.2 per cent and that for the Dow Jones Industrial Average gained 0.9 per cent, auguring likely early gains for Wall Street.

In early European trading, Germany's DAX advanced 1.3 per cent to 24,942.12, while the CAC 40 in Paris added 1.1 per cent to 8,444.00. Britain's FTSE 100 gained 0.2 per cent to 10,496.56.

After repeated false starts, investors were betting that this time, the war might end. U.S. President Donald Trump confirmed the initial agreement and authorized an end to the U.S. naval blockade of Iranian ports.

Iran confirmed it but signalled that implementation would not start until a signing that Pakistan said would be held Friday in Switzerland. Broader negotiations on issues like Iran's nuclear program are expected to continue over the next 60 days.

In early trading Monday, the price of Brent crude oil, the international standard, fell $4.37 US to $82.96 per barrel. U.S. benchmark crude lost $4.53 to $80.35 per barrel.

But it may take months for oil prices to stabilize after the disruptions from the war caused them to surge, pushing costs up for gasoline and many other products. Energy experts said shipping and insurance companies will want to be confident the pact will hold, ensuring that oil and gas supplies will flow freely enough for the world's needs to be met.

"The reopening of Hormuz is a relief valve, not a full peace dividend. The market can remove some crude panic, but it still has to price the gap between a headline, a signature and a regime that actually complies," Stephen Innes of SPI Asset Management said in a report.

Still, the news was a huge relief for markets that have been roiled since the conflict began in late February.

Stocks rallied in Asia, where Tokyo's Nikkei 225 gained five per cent to 69,317.50 as the benchmark logged another record high.

Buying was heaviest for technology shares, especially those related to artificial intelligence. The boom in AI has been driving gains in Japan, where the benchmark has gained more than 80 per cent in the last year.

WATCH | Why you can't just 'fully' reopen the Strait of Hormuz:

After more than six weeks of the de facto closure of the world's most critical energy chokepoint, Iran said the Strait of Hormuz was "completely open" to ship traffic. But as Andrew Chang explains, a few key factors complicate how open the shipping route actually is, and how long the status quo might hold. Images provided by The Canadian Press, Reuters and Getty Images

"This is great news," said Takashi Hiroki, chief strategist at Monex. "Buying by foreign investors is leading the market with expectations of easing tensions around the situation in the Middle East. Then the decline in New York crude oil futures is supporting this positive market."

The Kospi in Seoul surged 5.2 per cent to 8,545.98.

In Hong Kong, the Hang Seng gained 0.5 per cent to 24,842.67, while the Shanghai Composite index was up 1.6 per cent to 4,096.47.

Australia's S&P/ASX 200 advanced 1.3 per cent to 8,922.90. Taiwan's Taiex was up 2.8 per cent, and the Sensex in India rose 1.2 per cent.

On Friday, U.S. stocks advanced as Elon Musk's SpaceX soared in its highly anticipated debut on Wall Street.

In other dealings early Monday, the dollar slipped to 160.10 Japanese yen from 160.12 yen late Friday. The euro climbed to $1.1611 from $1.1578.