The strait, through which roughly a fifth of the world's crude supply normally passes, had been effectively closed by Iran following American and Israeli strikes in late February, pushing energy prices sharply higher. In the weeks after the conflict began, crude surged past $110 a barrel, but on Monday it shed around five per cent.

The agreement marks the end of three months of fighting, which have raised concerns about a prolonged return to high inflation, and will be formalised at a signing ceremony in Switzerland on Friday.

Wall Street opened higher, led by the tech-heavy Nasdaq. SpaceX climbed a further eight per cent, extending gains from the blockbuster $75 billion IPO of Elon Musk's rockets-to-AI company. Equity markets in Europe and Asia had already advanced ahead of the New York opening, while the dollar—typically a refuge for investors in uncertain times—weakened.
Tokyo and Seoul each rose by around five per cent, driven largely by fresh money flowing into technology stocks. Paris and Frankfurt also gained, though London's FTSE 100 edged lower, weighed down by major oil companies as energy prices retreated.

"Asian and European markets enjoyed a bounce on the news, but the scale of the advance wasn't as large as one might have expected," said Russ Mould, investment director at AJ Bell. "That's partly because markets had already recovered recently but also because inflation fears won't suddenly disappear."

Iran's Deputy Foreign Minister, Kazem Gharibabadi, said the deal brought an immediate end to the war and that negotiations towards a final agreement would begin within two months. The precise terms, however, remained unclear — the accord followed weeks of fraught talks and periodic threats from President Donald Trump of fresh military action, despite a ceasefire agreed in April.

"The deal with the Islamic Republic of Iran is now complete," Trump said on Sunday. "Ships of the World, start your engines. Let the oil flow!"

Attention now turns to the major central banks. Both the US Federal Reserve and the Bank of England are expected to leave interest rates unchanged this week, with policymakers preferring to monitor whether inflation risks subside before acting. It will be the first rate-setting meeting chaired by Kevin Warsh, who takes the helm at the Fed after Trump's repeated public calls for cuts to support the American economy.

"What he says about interest rates, given that inflation is still running at twice the Fed's two per cent target, should be interesting," said David Morrison, senior market analyst at Trade Nation.

The Bank of Japan, meanwhile, is expected to raise borrowing costs following a quarter-point increase by the European Central Bank the previous week.