Oil prices hit three-month low and markets reach record high amid Iran deal breakthrough

Oil prices fell after the announcement of a US-Iran peace deal, amid hopes the strait of Hormuz would soon reopen to commercial shipping. Photograph: AFP/Getty ImagesView image in fullscreenOil prices fell after the announcement of a US-Iran peace deal, amid hopes the strait of Hormuz would soon reopen to commercial shipping. Photograph: AFP/Getty ImagesOilOil prices hit three-month low and markets reach record high amid Iran deal breakthroughDonald Trump posts ‘Let the oil flow’ as US-Iran peace deal sparks immediate drop for Brent crude

Global oil prices have tumbled to a three-month low and stock markets closed at a record high amid fresh hopes that a US-Iran peace deal could end the greatest energy supply crisis in the history of the market.

The price of Brent crude dropped about 4% to about $83 (£62) on Monday amid optimism that the strait of Hormuz could reopen shortly and bring a return of Gulf oil exports to the market. Wholesale gas prices fell 6% in Europe.

Stock markets on Wall Street rallied, with the Dow rising by about 1% at market close, hitting a record high as investors welcomed the news that Washington and Tehran had reached the preliminary agreement. The Russell 2000 index of small US companies also hit a new high, rising about 0.8%.

Donald Trump said on Sunday that a deal was “now complete”, despite recent Israeli airstrikes on Beirut that had threatened to undermine the sensitive talks.

The US president wrote on social media: “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!”

An hour later he clarified that the strait would open after the peace deal was signed on Friday and “for purposes of mine removal, oil will flow on both ends again for the Region, and the World!”

Many of the details of the agreement are unclear, notably around the exact timing of the reopening of the maritime route, who will oversee safe passage and whether any conditions will be applied.

Iranian authorities have said there would be a 60-day negotiating period for a final deal tackling wider issues such as Tehran’s nuclear programme and sanctions relief.

The benchmark international oil price extended the falls recorded on Friday to just over $82 a barrel, its lowest since the early days of the war, on 10 March. Brent crude was just below $73 at the outbreak of the war in late February.

The oil price began tumbling late last week from $93 a barrel on Thursday to close at $87.50 on Friday after Trump said he was close to reaching a peace deal with Tehran that would end the regime’s effective chokehold on the oil trade route.

Global stock markets rallied on Monday. In Europe, the UK’s FTSE 100 opened up 0.8% before easing to broadly flat, while the French Cac 40 and the German Dax were up just over 1%. Shares in oil companies, including BP and Shell, fell sharply.