By Caitlin McCabe
The prospect of a possible peace deal with Iran sent oil prices falling and stock gauges around the world climbing Monday.
The most actively-traded Brent crude oil futures slid more than 5% to below $95 a barrel, the lowest since mid-April. That helped pull European bond yields lower as inflation worries cooled. The dollar weakened.
Stock indexes in Asia and Europe jumped, led by Japan and Taiwan, with each gaining around 3%. Tech-focused Nasdaq-100 contracts rose 1.4% to lead U.S. stock futures higher, with futures tied to the Dow Jones Industrial Average and S&P 500 both up around 1%.
U.S. and U.K. stock and bond markets are closed for holidays.
The weekend brought another stretch of whipsaw headlines for traders, starting Saturday when President Trump announced the near "finalization" of a pact with Iran that would reopen the Strait of Hormuz. He followed that on Sunday by saying he had informed his representatives not to rush into a deal and that the U.S. blockade on Iranian shipping would remain until an agreement is signed.
A full reopening of the Persian Gulf would remove a substantial overhang on the global economy. Prices for energy and fertilizer shot higher after the war began, feeding through to higher inflation around the world. That forced the Federal Reserve and other central banks to reverse course on interest-rate cutting campaigns, with markets now expecting higher benchmark rates instead.
In theory, those trends could reverse when ships stuck in the Gulf start sailing again.
Still, investors and market strategists greeted news of a potential peace pact with skepticism. Monday's moves were a story they had seen before. And any benefits for a deal could take months or longer to play out.
"It just seems to be this endless loop of Charlie Brown and Lucy with the football," said Michael Every, global strategist for economics and markets at Dutch lender Rabobank. "Every single time, it's 'Oh, this time is the breakthrough. This time, the energy will flow.' And at any one given time, it could be right. But so far, repeatedly, it hasn't been."
Even after weeks of war-driven market swings, Monday's moves stood out. Brent crude futures haven't settled below $100 since late April, though they are still more than $20 a barrel more expensive than before the war. The yield on Germany's benchmark 10-year government bond -- which has climbed steadily on rising interest-rate hike expectations -- sank below 3% to trade near its lowest level in more than six weeks.
With many traders in the U.S. and Europe away from their desks for holidays, trading volumes were lighter than usual Monday.
Moves across financial markets could be tempered by real-world realities. Bottlenecks will remain in the Strait, and shippers have said they would need to see an extended period of calm before they feel comfortable sailing through.
That means energy prices won't immediately return to their prewar levels, said Thomas Mathews, head of markets in Asia Pacific for Capital Economics.
"Even if the strait reopens soon, some of the effects on energy prices and monetary policy will persist for a bit," he said.
Another factor holding back a potential Iran-deal rally: Stock markets are already at or near records following a ferocious tech-driven rally that has sent the S&P 500 up nearly 18% from its wartime low.
"There's definitely still room for a bit more of a rally in bonds and equities if a deal is finally confirmed," Mathews said. "But the big picture is that a relief rally probably won't be very large by the standards of such things."
Write to Caitlin McCabe at caitlin.mccabe@wsj.com
(END) Dow Jones Newswires
May 25, 2026 09:42 ET (13:42 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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