Financial markets surged on optimism over potential US-Iran negotiations, with crude prices falling sharply after months of escalating tensions that had pushed energy costs to their highest levels since 2022.
Donald Trump announced he would temporarily halt his "Project Freedom" naval operation in the Strait of Hormuz, a critical waterway that handles roughly one-fifth of global oil shipments. The pause comes as the administration pursues what Trump characterized as significant progress toward a final agreement with Tehran, though he maintained that port blockades would continue.
Brent crude tumbled 2 percent to $107 a barrel following the announcement, retreating from earlier this week's surge driven by Middle East military escalations. The commodity had climbed as high as $126 per barrel just days before, when Trump had suggested the blockade could stretch for months and diplomacy appeared stalled.
Global equities caught the optimistic wave. MSCI's All-Country World Index jumped 0.4 percent to a new record, while Asian markets delivered more dramatic gains. South Korea's Kospi index charged ahead 6.6 percent, breaking through the 7,000 mark for the first time. US stocks followed suit, with the S&P 500 rising 0.8 percent and the Nasdaq Composite gaining 1 percent on Tuesday alone.
Analysts cautioned that the rally reflected a mix of genuine deal optimism and lighter trading volumes typical of holiday periods. Thomas Mathews, head of markets for Asia Pacific at Capital Economics, noted the timing could simply reflect thinner market conditions rather than sustained conviction about negotiations.
Technology stocks drove much of the buying interest, with investors continuing to favor Apple and memory chip makers, while materials showed selective strength. The broader momentum reflected investor appetite for what traders identified as 2026 winners, according to research from Pepperstone Group.
Author James Rodriguez: "A Trump-Iran deal would immediately reset energy markets that have been in crisis mode for months, but holiday-thin trading means we should hold judgment until real volume returns."
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