Asia Pacific Markets Surge on US-Iran Peace Deal Framework

Stock markets across the Asia Pacific have surged following the announcement of a framework to end the United States-Israel war on Iran.

Japan’s Nikkei 225 benchmark index soared 5.5 percent in morning trading on Monday, while South Korea’s Kospi jumped as much as 5.7 percent.

Taiwan’s Taiex climbed as much as 2.7 percent, while the ASX200 in Australia rose about 1.5 percent.

In Hong Kong, the Hang Seng Index rose about 1 percent, before giving up most of its gains later in the morning.

Futures for US stocks, which are traded outside of regular market hours, also climbed, with those tied to the benchmark S&P500 and the tech-focused Nasdaq Composite rising about 1 percent and 1.8 percent, respectively.

Brent crude, the primary benchmark for global oil prices, fell about 4.5 percent to below $83.40 per barrel.

“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, the head of Asia research for ANZ, told Al Jazeera.

“The fall in oil prices will provide some relief for central banks around the world who were worried about the inflation outlook. Focus now turns to the US Federal Reserve, which decides on interest rates this week.”

US President Donald Trump announced the completion of a “deal” with Iran in a social media post on Sunday, saying he had “authorised” the toll-free reopening of the Strait of Hormuz and the immediate removal of the US naval blockade of Iranian ports.

“Ships of the World, start your engines,” Trump wrote on Truth Social. “Let the oil flow!”

Iran’s Supreme National Security Council later confirmed that the sides had finalised the wording of a “memorandum of understanding”.

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 have not been officially confirmed, though the Iranian news agency Mehr reported that it includes an immediate cessation of hostilities on all fronts – including in Lebanon – the suspension of sanctions on Iranian oil sales, and the release of $24bn in frozen Iranian assets.

If implemented successfully, the agreement would pave the way for a return to normal shipping in the Strait of Hormuz, whose closure due to Iranian threats and attacks, as well as the US naval blockade, has roiled global energy markets for nearly four months.

The blockage of the strait has caused a daily shortfall of about 14 million barrels of oil, according to the International Energy Agency, driving up energy prices worldwide and spurring fuel shortages in numerous countries.

Despite the deal, it is expected to take months for global energy flows to fully return to normal, due to the logistical challenges of clearing the backlog of vessels in the Gulf and concerns about Iranian naval mines.

Speaking at an energy forum in Washington, DC, last week, US Secretary of Energy Chris Wright acknowledged that it could take “many months” for energy supplies to return to normal.

Svein Ringbakken, managing director of the Norwegian Shipowners’ Mutual War Risks Insurance Association, said thousands of ships remained trapped in and around the waterway.

“Even at full capacity, this would take months to restore to normal,” Ringbakken told Al Jazeera.

“Production lines have had to be stopped for many products because of lack of storage capacity. Add to this the damage to both production facilities and port infrastructure,” Ringbakken said.

“This all adds inefficiencies when the strait is opened.”

“Finally, if mines have been laid out, there may be the need for mine clearing before traffic at full capacity can be restored,” he added.

“That can take months.”

SV Anchan, chairman of US-based shipping firm Safesea Group, said it was hard to be enthusiastic about the deal with so few details, and predicted that it would take “over a year” for normality to return.

“From my point of view, it’s very hard to trust anything,” Anchan told Al Jazeera.

“We see the peace deal has been signed, but what is on paper and what is the on-the-ground reality?

“How are they going to untangle these mines? How are the underwriters going to react?” Anchan added.

“For us, it is still news, and we will watch it like the news, and we will see how it unfolds in the next two or three days.”