Global financial markets rallied on Monday after US president Donald Trump announced that the US and Iran had finalised a peace agreement that would reopen the strategically vital Strait of Hormuz and end months of military confrontation that had unsettled energy markets and raised fears of a wider regional conflict.
The agreement, expected to be formally signed in Switzerland later this week, is being viewed as a major diplomatic breakthrough with significant implications for global trade, energy supplies and regional stability.
In a post on Truth Social, president Trump declared that the agreement with Iran had been completed.
"The deal with the Islamic Republic of Iran is now complete. Congratulations to all!" he wrote, adding that the accord would facilitate the reopening of the Strait of Hormuz and the removal of the US naval blockade.
"I hereby fully authorise the toll-free opening of the Strait of Hormuz, and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade," Mr Trump said.
The Strait of Hormuz is one of the world's most critical maritime chokepoints, carrying nearly one-fifth of global seaborne oil supplies. Disruptions in the waterway over recent months had contributed to volatility in crude oil markets and heightened concerns about global energy security.
President Trump described the agreement as a historic achievement and said it would bring peace and stability to the region.
"This Great Deal will bring Peace and Security to the whole Region," he wrote, claiming that previous administrations had failed to secure a similar breakthrough.
Pakistan prime minister (PM) Shehbaz Sharif also announced that a peace deal had been reached between Washington and Tehran.
In a post on X, Mr Sharif said that, following intensive negotiations, both sides had agreed to an immediate and permanent cessation of military operations.
"Following intensive talks, we are pleased to announce that the Peace Deal between the United States of America and Islamic Republic of Iran has been reached," he said.
Mr Sharif added that both countries had declared the "immediate and permanent termination of military operations on all fronts, including in Lebanon."
While details of the agreement have not yet been released publicly, statements from both sides indicate that reopening the Strait of Hormuz and restoring commercial shipping routes form the centrepiece of the accord.
The agreement is also expected to facilitate mine-clearing operations and restore unrestricted navigation through the waterway.
Reports from international media organisations suggest that the arrangement represents an initial framework aimed at ending hostilities and creating conditions for broader negotiations on more contentious issues, including Iran's nuclear programme and sanctions relief.
President Trump indicated that these wider issues would be addressed separately, while the immediate objective was restoring freedom of navigation and reducing regional tensions.
Oil Prices Slide Sharply
The announcement triggered a sharp sell-off in crude oil markets as traders responded to expectations of improved supply flows and reduced geopolitical risks.
On the Multi Commodity Exchange (MCX), crude oil futures for June delivery fell ₹449, or 5.56%, to ₹7,624/barrel. July contracts declined ₹422, or 5.3%, to ₹7,546/barrel.
The drop pushed crude prices to their lowest levels in around three months, reflecting market expectations that the reopening of the Strait of Hormuz would ease supply concerns that had supported prices during the conflict.
Sensex, NIFTY and Rupee Jump
Indian equity markets responded positively to the development.
The benchmark BSE Sensex surged more than 1,100 points in early trade on Monday, rising 1,112.70 points to 76,648.74. The NSE NIFTY climbed 335.55 points to 23,956.40 as investors welcomed easing geopolitical tensions and lower energy costs.
Market participants viewed the agreement as particularly beneficial for India, one of the world's largest crude oil importers, as lower oil prices could help reduce import costs and support economic growth.
The Indian rupee also gained significantly against the US dollar.
The currency appreciated by 58 paise to 94.60 against the US dollar in early trade after opening at 94.70 in the interbank foreign exchange market.
Analysts attributed the gains to falling crude oil prices, softer US dollar sentiment and improving risk appetite across Asian markets.
Lower crude prices are especially favourable for India because they help reduce the country's import bill and ease pressure on the current account deficit.
Europe Welcomes Breakthrough
Leaders of France, UK, Germany and Italy jointly welcomed the memorandum of understanding between Washington and Tehran.
In a joint statement, the four countries described the agreement as a major diplomatic breakthrough and expressed readiness to support its implementation.
"We warmly welcome the announcement of the memorandum of understanding between the US and Iran," the leaders said.
The European nations emphasised that reopening the Strait of Hormuz and ensuring unrestricted maritime navigation remained critical to regional and global economic stability.
They also reiterated their long-standing position that Iran must not acquire nuclear weapons and signalled willingness to consider lifting relevant sanctions if Tehran takes clear and verifiable steps to address international concerns over its nuclear programme.
What Happens Next?
The agreement marks a significant de-escalation after more than three months of tensions that disrupted shipping, rattled energy markets and heightened fears of broader instability in the Middle East.
The planned signing ceremony in Switzerland is expected to formalise commitments already announced by both sides and could pave the way for further negotiations on security, sanctions and nuclear issues.
For global markets, the immediate impact has been clear: lower oil prices, stronger investor confidence and renewed optimism that one of the world's most strategically important energy corridors will soon return to normal operations.
As governments and investors await the formal signing of the agreement, attention is likely to remain focused on implementation of the accord and whether it can serve as a foundation for a more comprehensive easing of tensions between Washington and Tehran.
