US-Iran agreement fuels global equity rally as oil prices retreat

Market Commentary

US equities rallied on Monday after Washington and Tehran struck a preliminary deal to end the Middle East conflict and reopen the Strait of Hormuz, easing inflation fears and sharply lowering oil prices. The S&P 500 climbed 1.70%, the Dow Jones added 469 points to reach a record high, and the Nasdaq jumped 3.10%.

Lower energy costs and softer bond yields also improved the macro backdrop, helping growth sectors, particularly technology to outperform. Heavyweights Nvidia, Amazon, Meta, and Oracle each gained roughly 3%, while chipmakers extended gains as artificial intelligence (AI) developers continued capital spending and demand for AI infrastructure rose. SpaceX added further ground after its headline‑making Nasdaq debut, while Fox slid 15% on plans to acquire Roku in a $22bn deal. Attention now turns to the Federal Reserve’s policy meeting, where interest rates are widely expected to be left unchanged.

European markets also rallied. The Euro STOXX 50 rose 0.80% to a record high of 6 236 and the STOXX Europe 600 gained 0.30% as lower oil prices and falling sovereign yields improved the outlook for the region. Money markets scaled back expectations for additional policy tightening, now pricing in only one further interest rate increase from both the European Central Bank (ECB) and the Bank of England (BoE) by year-end. Banks led gains, with Santander, Deutsche Bank and BBVA advancing between 3% and 4.56%, while industrials also benefitted from lower energy costs, with Safran gaining 3.50% and Siemens rising 2.20%.

The FTSE 100 underperformed broader European markets, declining 0.30% as weakness in energy shares weighed on the index. Shell fell 4.40% and BP declined 3.40%, while healthcare and defence shares also retreated. In contrast, mining stocks gained from stronger precious metal prices, with Endeavour and Fresnillo rising nearly 7%, Antofagasta gaining more than 5% and Anglo American and Rio Tinto both ending higher.

Asian markets posted strong gains as the prospect of a reopening of the Strait of Hormuz reduced inflation concerns and lowered cost pressures for energy-importing economies. Japan’s Nikkei 225 surged almost 5% to a record high, led by technology and AI-related shares, including Kioxia, Murata Manufacturing, SoftBank Group, Advantest, and Tokyo Electron. Chinese equities also advanced, with the Shanghai Composite rising 1.61% and the Shenzhen Component jumping 3.79%, although energy shares underperformed amid lower oil prices.

Locally, South African markets started the week on a strong footing as easing geopolitical tensions and lower oil prices supported risk appetite. The FTSE/JSE All Share Index gained 2.51% to 115 556.19, while the Top 40 rose 2.72% to 107 546.49. Resource shares led the advance, with the Resource 10 Index surging 6.40% and the Metals and Mining Index jumping 9.15%. Improved investor confidence, lower oil prices and a weaker US dollar supported the positive performance across South African assets. The rand strengthened alongside broader emerging-market currencies, trading at R16.20 against the US dollar (0.58%), while also gaining against the pound and euro. 

On the commodity front, precious metals rallied, with gold rising 3.18%, silver gaining 4% and platinum advancing 4.54%. In contrast, Brent crude declined over 5% to $82.72 per barrel.