Oil prices tumble and markets surge after Iran deal lands

Financial markets did not wait for Monday to react to news of the US-Iran peace agreement. Oil prices dropped sharply and stock futures climbed this evening after President Trump announced that the United States had completed a deal with Iran and authorized the immediate reopening of the Strait of Hormuz.

West Texas Intermediate crude fell nearly 5% to around $81 a barrel shortly after 6 p.m. ET. Brent crude, the international benchmark, dropped roughly 4% to approximately $84 a barrel. Both benchmarks had already declined more than 3% on Friday after Pakistan signaled that a deal was close, meaning Today’s drop extended losses that had already begun building through the end of last week.

Futures tied to the Dow Jones Industrial Average climbed more than 300 points, or 0.7%. S&P 500 futures rose 0.9% and Nasdaq-100 futures gained 1.3%. Bitcoin rose more than 2% following the announcement.

The Strait of Hormuz, a narrow waterway between Iran and Oman, has been effectively closed since the war began in late February. Before the conflict, it handled approximately 20% of global oil and liquefied natural gas supply. Its closure created severe supply constraints that drove oil prices higher, fueled inflation across major economies, and raised concerns about stagflation in several countries.

Restoring shipping through the strait involves more than lifting the U.S. naval blockade. Iran must also relinquish control over ship traffic. Iran’s deputy foreign minister confirmed the deal Today and said Iran’s commitments under the accord would begin on Friday. Mine-clearing operations and infrastructure repairs are expected to take additional time before shipping volumes return to anything close to pre-war levels.

Gas prices at the pump have risen roughly 37% since the war began, reaching a national average of $4.07 a gallon Today, according to AAA. Diesel averaged $5.22, up approximately 39% over the same period. Prices at the pump typically lag crude oil movements by several days, meaning any meaningful relief for drivers is likely still a week or more away even if oil prices continue to fall.

Market observers have been cautious about reacting too strongly to headlines from the Iran negotiations over the past several weeks. Multiple moments appeared close to a breakthrough before stalling, conditioning investors to treat progress reports with skepticism. Today’s announcement from Trump, confirmed by Pakistan’s prime minister, is the clearest signal yet that an agreement is in place, though the full text has not been released and the most difficult issues remain unresolved.

One analyst noted that the playbook for markets, if the deal holds and the strait reopens, is straightforward. Oil sells off. Equities rise. The relief on energy prices would reduce pressure on central banks that have been forced to consider rate hikes in response to the inflation the war helped generate.

The European Central Bank raised interest rates by a quarter point on Thursday, its first hike since 2023, citing inflation driven in part by the energy shock. The Federal Reserve is scheduled to meet this week, with futures markets assigning a greater than 98% probability that rates remain unchanged. A sustained decline in oil prices could shift that calculus over subsequent months.

Today’s market reaction came on the heels of a strong Friday session driven partly by SpaceX’s initial public offering. The company’s shares surged more than 19% in their first day of trading, closing with a market cap above $2 trillion. Retail investors bought approximately $118 million worth of SpaceX shares on balance during the session, the largest retail buy-in for any IPO in recent history according to tracking firm VandaTrack.

The combination of a major geopolitical development and a landmark technology listing gave markets two distinct pieces of positive news in rapid succession heading into what will be a four-day trading week due to the Juneteenth holiday on Friday.