U.S. stock futures jumped and oil prices tumbled on Sunday after the U.S. and Iran confirmed they reached a deal that would reopen the Strait of Hormuz, after weeks of dashed hopes.
Futures tied to the Dow Jones industrial average leapt 267 points, or 0.52%. S&P 500 futures were up 0.79%, and Nasdaq futures surged 1.26%.
U.S. oil futures sank 3.8% to $81.65 a barrel, while Brent crude tumbled 3.4% to $84.35. Gold rose 1.6% to $4,307.30 per ounce.
The U.S. dollar was down 0.35% against the euro and dow 0.20% against the yen. The yield on the 10-year Treasury was flat at 4.483%.
“Deal with the Islamic Republic of Iran is now complete. Congratulations to all! I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!” Trump posted on social media a half hour before futures began trading in the U.S.
Soon after that, Iranian President Masoud Pezeshkian said in a post on X, “Agreement reached.” Deputy Foreign Minister Kazem Gharibabadi confirmed that the U.S. and Iran will formally sign the agreement on Friday in Geneva.
Trump later added that the Strait of Hormuz would reopen on Friday when the deal is signed and suggested more time was needed to remove mines in the narrow waterway.
Pakistan, which has served as a mediator during the talks, said the two countries would electronically sign the agreement later on Sunday.
Ever since the U.S. and Israel launched their war on Iran in late February, global markets have been gripped with the largest oil disruption in history as Tehran closed off the Strait of Hormuz.
While Iran’s conventional forces were decimated, its Islamic Revolutionary Guard Corps retained enough combat power to scare away global shipping.
The U.S. has been unable to restore full freedom of navigation, though it carved out an alternate route through the strait to allowed a growing trickle of oil to exit the Persian Gulf.
Although the deal announced Sunday should allow Hormuz traffic to return to normal levels, representing 20% of the world’s oil and liquid natural gas flows before the war, the most contentious issues will be negotiated over the next 60 days.
For example, Iran has demanded sanctions relief and access to its frozen assets, while details of how Iran’s nuclear program will be handled remain unclear.
Trump told the Wall Street Journal that Iran agreed not to obtain nuclear weapons, but extraction of its enriched uranium could come later.
“We’ll get the nuclear dust later on when we’re ready to go in and do it. I’d say over the next month or two, there’s no rush,” he said.
Trump insisted Iran wouldn’t receive any cash as part of the deal, but added that sanctions could be lifted. U.S. officials have previously said sanctions could be eased in phases as Iran follows through on nuclear promises.
The president also walked back one of his initial priorities for the Iran war. Hours have airstrikes began, he exhorted the Iranian people to overthrow the regime. That’s after he warned Tehran against cracking down on mass protests that started in late December.
To be sure, the U.S. and Israel killed Supreme Leader Ali Khamenei and other top officials, but he was quickly replaced by his son with other hardliners rising to leadership positions.
“As far as regime change, I never cared about regime change. This is the third group we’ve dealt with, and this is the most rational group yet,” Trump told the Journal.
On a Sunday marked by significant market movements, U.S. stock futures rose sharply while oil prices fell significantly following the announcement of a deal between the U.S. and Iran to reopen the crucial Strait of Hormuz. This development came after weeks of speculation and uncertainty regarding the state of relations between the two nations.
The futures tied to the Dow Jones industrial average increased by 267 points, or 0.52%. Similarly, S&P 500 futures saw a rise of 0.79%, and Nasdaq futures surged by 1.26%. In contrast, U.S. oil futures plummeted by 3.8%, settling at $81.65 a barrel, while Brent crude fell 3.4% to $84.35. Gold prices, on the other hand, experienced a notable increase, rising by 1.6% to $4,307.30 per ounce. The U.S. dollar weakened slightly, down 0.35% against the euro and 0.20% against the yen, while the yield on the 10-year Treasury bond remained stable at 4.483%.
The announcement of the deal was made by former President Donald Trump, who took to social media to express his approval. He declared, « Deal with the Islamic Republic of Iran is now complete. Congratulations to all! I hereby fully authorize the toll-free opening of the Strait of Hormuz, » indicating that the U.S. Naval blockade would be lifted and encouraging global shipping to resume operations. Iranian President Masoud Pezeshkian also confirmed the agreement in a post on X, and Deputy Foreign Minister Kazem Gharibabadi announced that the formal signing would take place on Friday in Geneva.
Trump later clarified that while the Strait of Hormuz would reopen upon the signing of the deal, some logistical issues, such as the removal of mines from the waterway, would require additional time to address. Pakistan, which has acted as a mediator in the discussions, indicated that the agreement would be electronically signed later in the day.
The backdrop to this agreement is a complex geopolitical environment, particularly following the U.S. and Israel’s military actions against Iran that began in late February. This conflict had led to severe disruptions in the global oil market, with Iran closing the Strait of Hormuz, through which 20% of the world’s oil and liquid natural gas flows. While Iranian conventional forces suffered significant losses, the Islamic Revolutionary Guard Corps retained enough capabilities to deter global shipping. The U.S. struggled to restore full navigational freedom, although it managed to create alternate routes to facilitate a limited flow of oil from the Persian Gulf.
With the announcement of the deal, expectations for a return to normal traffic levels in the Strait of Hormuz were raised, although several contentious issues remain to be negotiated over the next 60 days. Key points of contention include Iran’s demands for sanctions relief and access to frozen assets, as well as the future of its nuclear program, which remains uncertain. Trump indicated in an interview with the Wall Street Journal that Iran had agreed not to pursue nuclear weapons, but the specifics surrounding the extraction of enriched uranium might be addressed later.
Trump emphasized that while Iran would not receive cash as part of the agreement, there was potential for phased sanctions relief as Iran adhered to its commitments regarding nuclear activities. Additionally, he appeared to shift his stance on regime change in Iran, which had been a priority for him at the onset of the conflict. Despite U.S. and Israeli actions that resulted in the death of Iran’s Supreme Leader Ali Khamenei and other senior officials, Trump noted that the new leadership, albeit comprised of hardliners, was more rational compared to previous groups.
Reflecting on the broader implications of the deal, Trump stated, « As far as regime change, I never cared about regime change. This is the third group we’ve dealt with, and this is the most rational group yet. » This statement highlights an apparent pivot in U.S. policy toward Iran, suggesting a willingness to engage with the current Iranian leadership rather than pursue a complete overhaul of the regime.
In summary, the agreement to reopen the Strait of Hormuz marks a significant moment in U.S.-Iran relations, with potential implications for global oil markets and regional stability. While the initial reactions in the stock and oil markets were positive, the upcoming negotiations over key issues will determine the long-term viability of this deal and its impact on international relations.
