Why Asian Markets Are Rallying After Trump’s US-Iran Deal Announcement?

Asian equity markets erupted on Monday morning in one of their strongest single-day rallies in months as traders reacted to Trump's Sunday announcement that the US-Iran deal is now complete and the Strait of Hormuz is reopening. Japan's Nikkei 225 soared 5.5% in morning trading while South Korea's Kospi jumped as much as 5.7%, one of its best sessions of the year. Taiwan's Taiex climbed 2.7%, Australia's ASX 200 gained 1.5%, and futures for US stocks surged, simultaneously pointing to a sharply higher open for the S&P 500, Nasdaq and Dow Jones Industrial Average when New York markets open Monday.

The reaction was most acute in energy markets. US crude oil futures for July delivery were down 4.77% to around $80.83 per barrel by early Monday trading in Asian hours, while Brent futures for August delivery fell approximately 4% to $83.77 per barrel. Analysts said the moves reflect markets unwinding the geopolitical risk premium that has been embedded in oil prices since the US-Israeli strikes on Iran began in late February. Vivek Dhar at Commonwealth Bank of Australia said the bank expects Brent to fall to around $80 per barrel by year-end, assuming the Strait remains open and Iranian exports recover, noting that oil flows need only recover to around 60% to 70% of pre-war levels to restore a global supply surplus.

Bonds moved in the opposite direction from equities, with Treasury yields ticking modestly higher as investors shifted capital out of safe-haven assets into risk-on positions. Gold, which had surged dramatically during the height of the conflict, extended its retreat from January's all-time high, while airline stocks, logistics companies, and consumer goods retailers all saw pre-market gains in US futures as investors anticipated significantly lower fuel and input costs in the months ahead. The International Energy Agency had previously described the Hormuz closure as the largest supply disruption in the history of the global oil market, making Monday's reversal equally historic in its implications.