Oil falls and Asian stocks rally after US-Iran interim peace deal

Oil prices fell and Asian equities rose on Thursday after the United States and Iran signed an interim peace agreement that eased fears of further disruption to global energy supplies. Brent crude dropped as much as 1.6 percent in early Asian trading, while benchmark indices in Japan, South Korea and Taiwan moved higher. The market reaction came after several days of volatility linked to the war between the two countries and renewed concern over the security of shipping routes in the Gulf.

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Brent crude was down 1.9 percent in Asia, with August futures at $78.07 by 04:30 GMT, leaving the benchmark close to where it had been 24 hours earlier. The contract was still about 7 percent above its level before the US and Israel launched their war on Iran on 28 February. Prices had briefly spiked above $81 a barrel on Wednesday after Donald Trump warned that the US could resume military action if Iran did not "behave".

The rally in equities was broad across parts of Asia, with Japan's Nikkei 225 and South Korea's Kospi both hitting record highs. The Nikkei gained more than 2 percent and the Kospi rose 1.7 percent, while Hong Kong's Hang Seng Index fell 1.7 percent. US stock futures also advanced, with contracts tied to the S&P 500 up about 0.8 percent and those linked to the Nasdaq Composite up about 1.3 percent, suggesting the relief move could carry into the next trading session.

The agreement matters because it directly affects the flow of energy through the Strait of Hormuz, one of the world's most sensitive shipping routes. Pakistani Prime Minister Shehbaz Sharif, who mediated the talks between Washington and Tehran, said the memorandum of understanding had entered into force with immediate effect. He said Iran would reopen the strait and the US would lift its naval blockade of Iranian ports, although it was not immediately clear whether maritime traffic had yet improved.

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Shipping through the strait had been reduced to a fraction of peacetime levels because of the threat of Iranian missiles, drones and mines, as well as the US blockade. More than 500 vessels were estimated to be waiting to exit the Gulf through the waterway, and shipping companies had raised concerns about how to protect crews and cargoes. The market response suggests traders are treating the deal as a possible turning point for energy supply chains, even though the practical impact on shipping remains uncertain.

The wider backdrop is nearly four months of disruption that has fed into oil prices, transport costs and investor sentiment. The agreement also comes after repeated warnings that the conflict could spread beyond the immediate military confrontation and into global trade routes. For now, the key question is whether the ceasefire framework will hold and whether the reopening of the strait will translate into a sustained recovery in shipping and a further easing of oil prices.

Investors will also be watching for any sign that the deal is being implemented on the water, rather than only in diplomatic statements.

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