Nikkei 225 surges 5% as US-Iran deal sparks Asian market rally

The Nikkei 225 surged more than 5% on Monday, leading a broad Asian equity rally after the US and Iran confirmed a ceasefire deal that will end their conflict and restore shipping through the strategic waterway. The benchmark index had initially gained more than 2% in early trading before accelerating as the session progressed.

"While markets had already reacted late last week when President Trump indicated that a deal was close, actual confirmation spurred a further rally," Khoon Goh, head of Asia research at ANZ, said. "The fall in oil prices will provide some relief for central banks around the world who were worried about the inflation outlook."

South Korea's Kospi jumped 5.7%, Taiwan's Taiex climbed 2.7% and Australia's ASX200 rose about 1.5%. Brent crude fell more than 4% to around $83.70 a barrel as the agreement paves the way for normal shipping in the Strait of Hormuz, whose effective closure had removed about 14 million barrels of oil per day from global markets, according to the International Energy Agency.

The deal removes one of the biggest risks hanging over global markets this year, with the conflict between Israel and Iran having pushed Brent crude above $98 a barrel and stoked inflation fears that threatened to slow economic growth. US President Donald Trump announced the ceasefire on Truth Social on Sunday, authorizing the toll-free reopening of the strait and the removal of the US naval blockade of Iranian ports. Iran's Supreme National Security Council and Deputy Foreign Minister Kazem Gharibabadi later confirmed the agreement.

Oil Plunges as Strait of Hormuz Reopens

Brent crude's decline to $83.70 extends a selloff that began late last week after Trump signaled a deal was near. The blockade had created a daily shortfall of about 14 million barrels, according to the IEA, sending energy prices surging and fueling inflation concerns that weighed on equity valuations globally. Pakistani Prime Minister Shehbaz Sharif, whose government helped broker the deal, said an official signing ceremony would take place in Switzerland on Friday. Specific details of the agreement are yet to be announced.

Regional Markets Join the Rally

US stock futures also climbed, with S&P 500 futures up about 1% and Nasdaq Composite futures gaining 1.6%, signaling a strong open for Wall Street after Friday's session. The rally marks a sharp reversal from last week's turmoil, when South Korea's Kospi tumbled 8.3% on Monday amid worries that AI stock valuations had overheated. Still, global energy flows are likely to take weeks to fully return to normal due to the logistical challenges of clearing a backlog of hundreds of vessels from the Gulf, according to analysts.

The agreement removes a key source of uncertainty that had kept risk premiums elevated across Asian markets. With oil prices retreating and trade routes reopening, investors are now turning their attention to the US Federal Reserve's interest rate decision this week, which will test whether the relief rally can sustain its momentum.

This article is for informational purposes only and does not constitute investment advice.