As Oil Falls on the Iran Deal, Stocks and Bonds Rise – Europe Market Wrap

Stocks and bonds rallied while oil tumbled after the US and Iran agreed to end their war and reopen the Strait of Hormuz, easing concerns over energy supply disruptions and boosting risk appetite across global markets.

Nasdaq 100 futures rose 1.9%, while S&P 500 futures gained 1.2%. European equities climbed 0.7% to a record high, extending a broad relief rally. Brent crude fell to around $83 a barrel, hitting a three-month low as traders unwound the geopolitical risk premium embedded in oil prices. Gold and Bitcoin advanced, while the Dollar weakened against major peers. European bonds outperformed global fixed income markets.

The agreement between Washington and Tehran brings an end to a three-month conflict that claimed thousands of lives and fuelled volatility across financial markets. Investors welcomed the prospect of renewed energy flows through the Strait of Hormuz, which could help ease inflation pressures globally.

Lower oil prices reinforced expectations that central banks may face less inflationary pressure going forward. Markets reduced expectations for Fed tightening, with swaps traders pricing around a 70% chance of a 25 bps rate hike by December, down from roughly 80% on Friday.

Treasuries rallied, sending the 10-year yield down 4 bps to 4.44%. Some strategists argued yields could fall toward 4.20% if the decline in energy prices proves sustained and inflation concerns continue to ease.