Oil prices slide below $100 as Strait of Hormuz reopening hopes lift global stocks

Oil prices tumble on deal expectations

North Sea Brent, the international benchmark, and West Texas Intermediate (WTI) crude futures fell more than 5 percent on Monday following weekend headlines suggesting progress on talks to end the Middle East war and reopen the Strait of Hormuz. Brent was down 5.5 percent at $94.73 a barrel, while WTI declined 5.9 percent to $90.88 a barrel at around 1540 GMT.

US Secretary of State Marco Rubio said during a visit to New Delhi that a deal could be announced “today.” His remarks followed President Donald Trump’s statement that negotiations with Iran were being conducted in an “orderly and constructive manner,” while cautioning that US negotiators had been advised “not to rush into a deal.” Market participants are positioning for an accord that would allow Gulf tanker traffic to resume through the Strait of Hormuz and potentially ease fuel prices ahead of the northern hemisphere’s summer tourism season.

Reports that Iran’s top negotiator Mohammad Bagher Ghalibaf had arrived in Qatar on Monday as part of the “diplomatic process” added to investor optimism. Chris Weston, head of research at Pepperstone, noted that, according to reports from Trump, a memorandum of understanding has been “largely negotiated,” with details to be announced at some point.

Global equities advance despite inflation concerns

Equity markets rallied on the prospect of a resolution to the conflict. Tokyo’s Nikkei 225 index rose 2.9 percent to close at 65,158.19 points, topping 65,000 for the first time. In China, the Shanghai Composite gained 1.0 percent to 4,152.57.

In Europe, Paris’s CAC 40 climbed 1.8 percent to 8,258.26, while Frankfurt’s DAX 30 advanced 2.0 percent to 25,389.10, although trading volumes were limited by Whit Monday closures in several countries. London was closed for the Spring Bank holiday, and Wall Street was shut for Memorial Day.

Currency markets showed modest moves, with the euro rising to $1.1646 from $1.1608 on Friday, the pound strengthening to $1.3502 from $1.3441, and the dollar easing to 158.90 yen from 159.13 yen.

Later this week, investors will monitor the US Federal Reserve and its new chief Kevin Warsh for signals on how upcoming consumer inflation data could influence interest rates. Many economists have warned that sustained price pressures from the US and Israeli war against Iran could constrain the Fed’s scope for rate cuts, which Trump has repeatedly urged. In Europe, expectations of higher inflation are seen as likely to push the European Central Bank toward rate increases, even as growth remains subdued. Nonetheless, strong corporate earnings and AI-related technology optimism have supported record-high levels in key US indices despite the economic fallout from the conflict.

FAQ

Why did oil prices fall below $100 a barrel on Monday?
Oil prices declined on expectations that negotiations between Washington and Iran could lead to a deal to end the Middle East war, reopen the Strait of Hormuz, and ease supply disruptions, reducing risk premiums in crude markets.

Which stock markets showed notable gains?
Tokyo’s Nikkei 225 rose 2.9 percent to 65,158.19, the Shanghai Composite gained 1.0 percent to 4,152.57, Paris’s CAC 40 increased 1.8 percent to 8,258.26, and Frankfurt’s DAX 30 advanced 2.0 percent to 25,389.10.

What are investors watching from the US Federal Reserve this week?
Investors are focused on how the Federal Reserve and its new chief Kevin Warsh will respond to key consumer inflation data and what that implies for future interest-rate decisions.

How is inflation influencing central bank expectations?
Sustained price increases linked to the US and Israeli war against Iran are seen as limiting the likelihood of Fed rate cuts, while in Europe, anticipated higher inflation is expected to prompt the European Central Bank to raise interest rates despite subdued growth.