Global markets rallied and oil prices fell sharply after the US and Iran agreed to a framework aimed at reopening the Strait of Hormuz, but analysts warn the road to normalisation could take months.
Global financial markets surged this week after the United States and Iran announced a breakthrough peace agreement that is expected to pave the way for the reopening of the strategically important Strait of Hormuz, a vital shipping route through which roughly a fifth of the world's oil supply normally passes.
The prospect of easing tensions in the Middle East triggered a sharp rally across global equity markets while sending crude oil prices lower as investors unwound some of the geopolitical risk premium that had been built into energy markets over the past three months.
European shares climbed strongly after news of the preliminary agreement, with the STOXX 600 reaching a record high as investors welcomed the prospect of reduced supply disruptions and lower inflation risks.
Neil Wilson, Investor Strategist at Saxo UK, said the agreement had significantly improved investor sentiment.
