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The U.S. and Iran have reached a preliminary agreement to reopen the Strait of Hormuz and extend a fragile ceasefire, raising hopes of an end to a conflict that has disrupted global energy markets and fuelled fears of a broader regional war.
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Global share markets rallied, and oil prices tumbled after the United States and Iran confirmed a ceasefire agreement, raising hopes that months of disruption to global energy supplies could soon come to an end.
The memorandum of understanding, reached early today, would pave the way for the resumption of oil and natural gas shipments through one of the world’s most strategically important waterways.
The groundbreaking agreement is also intended to extend a ceasefire that has helped halt fighting following months of hostilities across the Middle East.
Key mediator Pakistan said a formal signing is expected to take place in Switzerland on Friday. Details have not yet been released; Iranian officials indicated implementation would not begin until the deal is formally signed.
If successful, the Week 25 agreement could well mark a significant step towards ending a conflict that has claimed thousands of lives across the region, including several senior figures within Iran’s leadership, while triggering one of the most severe energy supply disruptions in recent years.
Financial markets responded positively to news of the agreement. Investors welcomed the prospect of oil exports returning to global markets after months of disruption in the Strait of Hormuz, a critical shipping corridor that handles a substantial portion of the world’s seaborne crude oil trade.
Asian equities rallied: Japan’s Nikkei climbed over +5%, and South Korea’s Kospi gained +5.7%. The ASX 200 rose ~1.4% as investors moved back into risk assets.
Oil markets reacted immediately, with Brent crude falling more than -4%, to just around US$84 a barrel as geopolitical risk premiums unwound.
The decline weighed heavily on local energy producers. Woodside fell ~3% while Karoon dropped more than -6% as investors reassessed earnings expectations.
At the same time, Australian sectors that should benefit from lower fuel costs moved sharply higher. Travel stocks were among the market’s strongest performers Down Under today, with Virgin Australia jumping more than 11%. Qantas gained around +5%, while Flight Centre rose roughly +8%.
For now, investors are treating the agreement as the strongest signal yet that a pathway exists towards restoring stability in one of the world’s most important energy corridors.
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