Financial markets across Asia and Europe roared higher on Thursday while oil prices fell sharply, after Washington and Tehran confirmed a deal to end hostilities. The announcement, confirmed by Al Jazeera and other international news outlets, sent relief through trading floors from London to Tokyo within hours of the confirmation reaching global markets.
Markets React Within Hours
The confirmation triggered immediate buying across global indices. Tokyo's Nikkei 225 closed the session up by more than 2 percent, while the Shanghai Composite Index climbed 1.5 percent. European markets followed suit, with London's FTSE 100 rising 1.8 percent in early trading as investors welcomed the reduction in geopolitical risk that had weighed on markets for months.
"The market has been pricing in a risk premium for potential disruption to oil shipments through the Strait of Hormuz," said one senior dealer at a London-based brokerage firm, speaking before markets closed on Thursday. "That premium is now being unwound rapidly."
US futures pointed to a positive open on Wall Street, with the S&P 500 expected to add between 1 and 1.5 percent at the opening bell.
Oil Prices Fall on Supply Relief
Brent crude, the global benchmark, dropped to around $78 per barrel from levels above $84 just 24 hours earlier. West Texas Intermediate, the US standard, fell by roughly $5 per barrel in Asian trading. The sharp decline reflected market expectations that Iranian oil production would remain stable and that the vital shipping lanes of the Persian Gulf would face no disruption.
Oil had traded at elevated levels in recent weeks as investors priced in the risk of potential supply shocks. Gasoline prices at UK pumps, currently averaging around 145 pence per litre nationally, are expected to fall in the coming fortnight as wholesale costs decline.
UK Households to See Fuel Bills Drop
British consumers are set to benefit directly from lower oil costs. Motoring organisations forecast that petrol prices could fall by 3 to 5 pence per litre within days, while home heating oil costs have already begun declining. Wholesale gas prices in the UK, which track oil markets closely, fell by 4 percent on Thursday morning.
Energy-intensive manufacturers, including those in the steel, ceramics, and chemical sectors, welcomed the relief. Several companies had warned in recent quarterly reports that rising energy costs were squeezing profit margins.
Business Investment Set to Rise
Corporate Britain responded with cautious optimism. Business confidence surveys had shown mounting anxiety about energy costs and supply chain disruption in the event of prolonged hostilities. Several major infrastructure projects had been placed under review pending clarity on oil price stability.
Shipowners and aviation companies were among the clearest beneficiaries. IAG, the owner of British Airways, saw its share price climb 3 percent in London trading. Tanker operators, who had faced insurance premium increases in recent months, expect those costs to ease substantially.
Aerospace and Defence Contractors Adjust
The defence sector presented a more mixed picture. While BAE Systems shares rose on general market optimism, analysts noted that long-term defence budgets might face scrutiny as governments reassess spending priorities in a less tense geopolitical environment. The FTSE 100 listed defence contractor gained 1.2 percent by midday.
Investors Rotate Out of Safe Havens
The flows out of traditional safe-haven assets were pronounced. Gold fell to around $2,320 per troy ounce from peaks above $2,400 reached during the period of highest tension. The Japanese yen, which tends to strengthen during crises, weakened against the dollar as risk appetite returned to currency markets.
Pension funds and sovereign wealth funds, which had increased allocations to defensive assets in recent months, are expected to rebalance portfolios toward equities and corporate bonds. The sudden shift could accelerate if the peace deal holds and is formalised at the negotiating table.
Iran Output Hinges on Sanctions Relief
Market analysts are divided on how quickly Iranian oil could reach global markets. The country has significant production capacity currently constrained by international sanctions. Should the deal include sanctions relief, additional supply could push oil prices down further, analysts at several investment banks warned in notes to clients on Thursday.
However, any sanctions adjustment would require formal approval from the US Congress and coordination with European allies. That process could take weeks or months, tempering immediate expectations of a supply surge.
What Comes Next for the Deal
Diplomatic sources indicated that formal negotiations to codify the agreement would begin within the next 30 days, with Vienna mentioned as a likely venue for talks. Market participants said they would watch the Joint Comprehensive Plan of Action framework closely for any signs of backsliding.
Central banks, including the Bank of England, will factor the reduced geopolitical risk into their inflation forecasts at upcoming policy meetings. Lower oil prices could accelerate the pace of interest rate cuts in the UK, where the Monetary Policy Committee has been debating the pace of easing.
For now, traders are permitting themselves optimism. "One announcement does not make a lasting peace," cautioned one emerging markets fund manager in the City of London. "But the direction of travel has changed, and markets are right to celebrate that."
See Also
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- Iran Strikes Shut Kuwait Airport — Markets Brace for Regional Disruption
