Precise Investors Editorial Team
Brent crude dropped 4.7% to $83.24 a barrel, well away from its May high of $126.41
Share markets and bonds rallied hard in Asia on Monday and oil prices tumbled as a tentative peace deal between Iran and U.S. promised to ease inflationary pressures and lessen the need for higher interest rates.
Iran said traffic through the strait would be regulated by it and Oman, a potential blow to the rules of free trade and suggesting there might be a toll of some sort on transits.
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, a 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, Callow said.
The news will be a relief for the crowd of central banks meeting this week, easing some of the pressure to tighten policy to head off an energy-driven rise in inflationary expectations.
Markets had already priced in a likely deal but the confirmation was enough to send Brent crude dropping 4.7% to $83.24 a barrel, well away from its May high of $126.41.
We see Brent oil futures falling to $80 by the end of the year assuming the strait does not close again, said Vivek Dhar, a mining and energy analyst at CBA.
He said: Our forecast implicitly assumes that oil and refined product exports can resume quickly through the Strait of Hormuz, but this view carries considerable uncertainty tied to the damage to oil and refinery assets.
In Europe, EUROSTOXX 50 futures and DAX futures both gained 1.7%, while FTSE futures rose 0.7%.
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