Asian stock markets surged on Monday as oil prices dropped significantly following a preliminary peace deal between the United States and Iran.

The deal is expected to alleviate global inflationary pressures and potentially reduce the need for further interest rate hikes by central banks worldwide, News.Az reports, citing The Independent.

The breakthrough was first announced by Pakistani prime minister Shehbaz Sharif early on Monday, stating that "a deal had been struck".

US president Donald Trump later claimed the agreement included the reopening of the vital Strait of Hormuz, though he provided no specific details.

Mr Trump is scheduled to meet with Mideastern leaders and attend a working session with Ukraine’s Volodymyr Zelenskiy during the G7 summit in France this week.

However, Iran indicated that traffic through the strait would be regulated jointly by Tehran and Oman, a move that could challenge established rules of free trade and potentially introduce shipping tolls.

"The lack of details especially on freedom of shipping is a concern but not one that should constrain markets today as the surge in risk appetite plays out,” Sean Callow, senior FX analyst at ITC Markets, noted. “The prospect of a sustained fall in energy prices changes the conversation for central banks just ahead of a flurry of policy decisions."

This news offers a welcome reprieve for numerous central banks convening this week, easing some of the pressure to tighten monetary policy in response to energy-driven inflation expectations. Although markets had largely anticipated a deal, its confirmation sent Brent crude falling 4.7 per cent to $83.24 a barrel, well away from its May peak of $126.41. US crude slid 5.5 per cent to $80.16 a barrel, but was still above the $67 level it traded at before the war began.

News.Az 

By Ulviyya Salmanli