Global stocks surge toward records as oil falls on US-Iran deal hopes

The world's stock markets woke Monday to a familiar pattern: the prospect of peace moving prices upward, oil falling, and investors reaching for assets they'd been avoiding. The MSCI All Country World Index, which tracks equities across every major economy, climbed 0.3% to approach the all-time high it had touched earlier in May. In Asia, the momentum was sharper. Japan's Nikkei surged past 3% to a record, buoyed by technology stocks. Hong Kong and London were closed for holidays, but futures markets in New York told the story: contracts on the S&P 500 rose 0.9% to an all-time high, extending a winning streak that had now lasted eight consecutive weeks—the longest run since 2023.

The catalyst was oil. Brent crude dropped more than 4% to around $99.25 a barrel, its lowest price in over two weeks, after US officials signaled Sunday that negotiations with Iran over reopening the Strait of Hormuz were nearing completion. The Strait, a narrow waterway between Iran and Oman, is the world's most critical chokepoint for energy transport; roughly a third of all seaborne oil passes through it. If the channel could be demined and reopened, the flow of crude would resume, prices would fall further, and the inflation that had been pushing central banks toward rate hikes would ease. The dollar weakened against every major currency. Gold and silver, assets that benefit when inflation expectations drop and interest rates may fall, climbed higher. Treasury futures rose as traders priced in lower inflation ahead.

Yet the deal remained unsigned. According to the Washington Post, the US and Iran had developed a framework that would extend a ceasefire for 60 days while permanent negotiations continued. Ships had begun transiting the Strait—33 vessels in a single 24-hour period after obtaining clearance from Iran's Islamic Revolutionary Guard Corps Navy. But Iran's state news agency, Tasnim, cautioned that the agreement could still collapse. Tehran wanted its frozen assets unfrozen; the US was resisting. And on Sunday, President Trump had shifted tone, saying he would not "rush" into any deal, a statement that sent market analysts scrambling to recalibrate their odds. "I think it's 50/50 again on this deal," said Nick Twidale, chief market analyst at AT Global Markets, "although obviously a positive that they are negotiating."

The broader market momentum had been building for weeks. Global equities had surged to record highs on two separate currents: optimism that Middle East tensions might ease, and renewed enthusiasm for artificial intelligence stocks. But those same gains had pushed bond yields to multi-year highs, and inflation remained a persistent concern. Kevin Warsh, Trump's new Federal Reserve chair, had been sworn in Friday with a mandate to shake up the central bank. Markets had fully priced in a rate hike by year-end. Later in the week, new inflation data from the US and Europe would arrive, offering clues about whether the Fed would need to act swiftly or could afford to wait.

Alison Shimada, a portfolio manager at Allspring, told Bloomberg Television that investors had been "looking beyond Iran war for a month or so." The real question, she suggested, was what came next. Lower oil prices would help, but both sides seemed to want a negotiated end to the conflict, not just a temporary ceasefire. That meant positioning for a world where energy was cheaper and inflation was falling—but also where central banks might finally have room to cut rates, a shift that would reshape everything from bond yields to currency values.

Meanwhile, China announced an unprecedented crackdown on illegal cross-border trading, threatening severe penalties against brokers and ordering non-compliant accounts liquidated within two years. The move, announced Friday after markets closed, sent US-listed Chinese stocks tumbling. It was a reminder that geopolitical risk extended far beyond the Middle East. ANZ Bank strategists warned that while reopening the Strait would be positive for global oil flows, "the fluid nature of the negotiations and the unresolved differences suggest oil price volatility could persist for some time yet." Markets were pricing in peace, but peace had not yet arrived.