Time to wrap up….

Global oil prices have tumbled to a three-month low and stock markets rallied amid fresh hopes that a US-Iran peace deal could end the greatest energy supply crisis in the history of the market.

The price of Brent crude dropped 5% to below $83 (£62) a barrel as the new trading week began, amid optimism that the strait of Hormuz could reopen shortly and bring a return of Gulf oil exports to the market. Wholesale gas prices fell 6% in Europe.

Stock markets on Wall Street rallied, with the Dow Jones industrial average rising by 1% to hit a new record high as investors welcomed the news that Washington and Tehran had reached the preliminary agreement. The Russell 2000 index of small US companies also hit a new high, rising by 1.5%.

Trump said on Sunday that a deal was “now complete”, despite recent Israeli airstrikes on Beirut that had threatened to undermine the sensitive talks.

The US president wrote on social media:

“I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!”

An hour later he clarified that the strait would open after the peace deal was signed on Friday and that “for purposes of mine removal, oil will flow on both ends again for the Region, and the World!”

More here:

Experts are warning, though, that a return to pre-crisis normality is months away and relies on the cooperation of the Iranian regime with the White House.

And in other news:

Britain’s stock market has missed out on today’s relief rally.

Although miners, industrial stocks and financial firms rallied, the wider FTSE 100 share index has closed 41 points lower at 10,430 points, down 0.4% today.

Defence firm BAE Systems led the fallers, down 4.7%, amid hopes of a sustained end to hostilities in the Middle East, followed by oil and gas producer Shell (-4.3%).

The International Monetary Fund has declared it is still on ‘high alert’ for economic damage caused by the Iran war.

In a blog post published this afternoon, IMF managing director Kristalina Georgieva writes that the global economy “appears to be holding up”, more than three months after the Iran war started

She says there are not yet signs of a global slowdown, with “strong economic momentum” in the US and China.

But, Georgieva warns, there are also significant disparities; some countries and communities have been harder hit. And in Africa, the negative impacts are more conspicuous.

She writes:

That the global economy is so far weathering the shock is cause for reassurance—but not complacency.

The IMF remains on high alert.

Back in the UK, engineering firm Rolls-Royce has secured two important agreements involving its new small nuclear reactors.

Swedish nuclear development company Videberg Kraft has chosen Rolls-Royce to supply three Small Modular Reactors (SMRs) on the Värö peninsula, on Sweden’s west coast.

Videberg Kraft say:

The Videberg Project will build Sweden’s first new nuclear power plant in more than 40 years. It will significantly strengthen the Swedish energy system by adding 1,500 MWe of clean baseload capacity – around 6 percent of Sweden’s annual power consumption - for more than 60 years, supporting industries and households in southern Sweden while enhancing energy security.

This comes a day after the UK and Japan agreed to co-operate on advanced nuclear technologies, under which Rolls-Royce will work with the United Kingdom National Nuclear Laboratory (UKNNL) and Japan Atomic Energy Agency (JAEA), to “accelerate the introduction of advanced nuclear technologies in the UK.”

Boom! The US Dow Jones industrial average has hit a record high in early trading, as Wall Street jumps.

Relief over the US-Iran peace deal has pushed the index of 30 large US companies to a new peak of 51,857 points, over the previous record peak set in early June.

Aerospace manufacturer Boeing (+4%) is leading the risers, followed by construction equipment maker Caterpillar (+3.6%), and Amazon (+3.3%)

The Russell 2000 index of small US companies has also hit a record high, up 1.5%. This follows gains in European markets, which hit their own record high this morning.

“Peace optimism” is helping Wall Street to rally, says Neil Wilson, Saxo UK investor strategist, who explains:

Stocks soared and oil prices slid after the US and Iran agreed a peace deal to reopen the Strait of Hormuz.

“Ships of the World, start your engines. Let the oil flow!” President Trump posted. Iran confirmed the text of a memorandum of understanding had been finalised and said the war would end “permanently and immediately on all fronts”.

The two countries will sign the deal in a few days, in Switzerland, after the G7 leaders conference in France this week. The deal is seeing investors take some geopolitical risk premia off the table.

Wall Street’s main indexes have jumped at the start of trading, as New York traders welcome the news that Washington and Tehran reached a preliminary agreement to end the Middle East conflict and reopen the Strait of Hormuz.

The Dow Jones Industrial Average has climbed by 642 points, or 1.25%, to 51,844 points.

The broader S&P 500 is up 1.5%, while the Nasdaq Composite has climbed by 2.25%.

The disruption to fertiliser supplies caused by the Iran war may not be reversed quickly, expert warn.

The Middle East is a key supplier of nitrogen-based fertilisers such as urea, and shortages since the conflict began have pushed up food prices.

But the bad news for farmers (and ultimately consumers) is that fertilizer cargoes are unlikely to be among the first shipments to move.

Alexis Ellender, senior dry bulk lead at Kpler, says (via Bloomberg):

“When it comes to moving ships through the Strait of Hormuz, it’s going to be oil tankers and LNG carriers that are top of the list once we get towards a more normal flow of traffic.

“Fertilizer is not as high a priority.”

Here’s our news story on the drop in the oil price today:

European gas prices have dropped sharply today, on hopes that supplies from the Middle East will resume soon.

Despite warnings that it will take time for traffic through the strait of Hormuz to resume, wholesale gas prices have dropped to their lowest in over a month.

The month-ahead UK gas contract is down 7% at 103.9p per therm, its lowest level since 7 May, as traders react to the US-Iran peace deal.

The continental gas price has dropped by 6.4%, to €43.785 per megawatt hour.

That will make it cheaper for governments to rebuilt their liquified natural gas (LNG) reserves ahead of next winter.

Analysts at ING say:

Europe still needs to replenish its gas storage, which sits well below the seasonal average – at a time when Asia will increasingly compete with Europe for LNG supplies.

Aluminium prices have fallen ⁠to their lowest level in two-and-a-half months today, on hopes that shipments from the Middle East will pick-up soon.

Producers in the region use the strait of Hormuz to bring in alumina and ship out refined aluminium.

The benchmark three-month aluminium on ⁠the London Metal Exchange fell by around 3.3% to $3,417 per tonne, its lowest since March ⁠30.

We have takeover drama in the media and technology world: Fox has reached a deal to aquire streaming service Roku in a $22bn deal.

Fox says the deal will create a “a scaled next-generation media and technology company”.

It brings together Fox’s live content – such as American football and baseball action, and Fox News – with the 100m households who use Roku’s streaming platform.

Lachlan K. Murdoch, executive chair and chief executive officer of Fox Corporation, has called the deal “a defining moment for Fox”, adding:

This combination will transform the scope of our company into high-growth verticals and yield a step change in our overall growth profile.

And we are executing this acquisition from a position of financial strength – maintaining our investment grade balance sheet while providing our shareholders with an uninterrupted return of capital program in the form of share buybacks and dividends. Roku pioneered streaming TV and scaled it into a leading CTV platform. Together, we intend to lead its next chapter.”

It could take weeks before the operation to ensure the strait of Hormuz is safe from mines has ended.

Reuters is reporting that this could delay a return to normal shipping traffic by weeks following a deal to reopen the waterway, according to shipping and maritime security sources say.

They add:

The operation by conventional minesweepers and state-of-the-art underwater drones could continue for 40 to 50 days before many insurance, shipping or oil companies are confident enough to sail through, according to assessments from five Western maritime security sources.

That could potentially hold up tens of millions of barrels of oil, in addition to the oil supply from the Gulf already blocked since the United States and Israel attacked Iran on February 28, according to estimates based on pre-war flows.

Earlier this month, US secretary of state Marco Rubio warned that Iran has mined “large segments” of the Strait of Hormuz.

The US-Iran deal removes the threat of a jump in oil prices this summer, says James Hosie, equity analyst at UK investment bank Shore Capital:

“The Brent spot price is now back to its lowest level since early March at c.$83 per barrel as markets digest the increasingly optimistic tone that the US and Iran are to sign a framework agreement to end the current conflict. Critically, the agreement includes the reopening of the Strait of Hormuz, with both sides ending their blockades.

A full recovery of Middle East oil, LNG and oil products supply will take time, but we see this news as removing the threat that a continuation of the existing stalemate driving a further spike in oil prices if inventory drawdowns had continued through the summer.”

Looking further ahead, the prices for oil delivery in a year’s time have dropped today, but remain higher than before the Iran war.

The cost of a barrel of Brent crude for delivery in June 2027 is down around 2% to $76.89 a barrel today.

That’s down from $82/barrel a month ago, but still much higher than before the Iran war when this contract traded at around $66 a barrel.

Kit Juckes, economist at French bank Société Générale says:

Many important lessons were learnt through nursery rhymes and the fact that you can’t put an egg back together after a fall is one of them….

The forward market remains concerned that getting supplies back to pre-war levels will take a long time.

Mortgage borrowers can breathe a sigh of relief at the news of a peace deal in Iran, says Adam French, head of consumer finance at Moneyfactscompare.co.uk.

While we are far from being out of the woods yet, a lasting peace deal should dramatically reduce the risk of the Bank of England’s worst-case scenario for inflation and interest rates becoming a reality.

“Under that scenario, Base Rate could have risen to 5.25%, potentially pushing typical rates on new mortgages towards 6.75%. Instead, today’s news means mortgages rates, which have already been slowly falling for several weeks, have likely already passed their peak – at least until the next unwelcome crisis.

“Borrowers can be optimistic but with a word of caution, as inflation and economic data will continue to influence the outlook. However, a lasting peace should remove one of the biggest risks to mortgage costs and may help restore a more stable environment for hard-pressed remortgage borrowers and prospective buyers.”

Even before this morning’s drop in UK bond yields (see earlier post), average mortgage rates have dipped slightly.

Moneyfacts reports:

• The average 2-year fixed residential mortgage rate today is 5.61%. This is down from 5.62% the previous working day.

• The average 5-year fixed residential mortgage rate today is 5.58%. This is down from 5.59% the previous working day.

Donald Trump excitedly declared: “Ships of the World, start your engines. Let the oil flow!” last night, but the reality is that it will take some time for oil flows through the strait of Hormuz to return to pre-war levels.

One reason is that many oil tankers are simply in the wrong place, after the long closure of the strait.

Another is that some production and refining facilities have been damaged by the conflict, while others were mothballed after storate facilities filled up to the brim.

A third factor is that insurers could still be wary of the conflict reigniting, and price their cover accordingly.

Neil Shearing, group chief economist at Capital Economics, explains:

Even if ships now have safe passage, tankers are in the wrong place, oil production/refining facilities need to get up to full capacity, and questions over the cost and availability of insurance for ships traversing the Strait will remain.

Our current working assumption is that ~80% of energy flows will resume by the end of Q3. Natural gas flows will be slower to return, following the damage to Qatari facilities earlier in the conflict, which according to local officials has put 17% of production offline for two to three years.

US crude oil has dropped to its lowest level since the second week of the Iran war.

The cost of a barrel of West Texas Intermediate (WTI) light sweet crude has dropped by 6% today to $79.72 per barrel, the first time since 10 March that it has been under $80/barrel.

That could help to pull down US gasoline prices, which climbed after the conflict began, hitting consumer confidence.

Today’s relief rally is also driving up government bond prices, pushing down the cost of borrowing.

The yield (or interest rate) on 10-year UK government debt has dropped by 6.5 basis points (0.065 of a percentage point) to 4.775%.

Two-year bond yields are down 8bps to 4.16%.

Lower bond yields indicate that that the cost of issuing new government debt has fallen, which will be a relief for the UK Treasury after the Iran war drove up borrowing costs.

European stock markets have hit a record high at the start of trading, as relief over the US-Iran peace deal ripples across global markets.

The pan-European Stoxx 600 index has jumped by 0.9% to 639 points, over the previous record high set just before the Iran war started, with shares rising in London, Frankfurt, Paris, Madrid and Milan.

Mining and travel companies are driving the rally, while oil company shares are sliding.

That follows sharp gains in Asia-Pacific markets overnight, where Japan’s Nikkei surged by 5% on hopes that the strait of Hormuz will reopen within days.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, says global equity markets are starting the week firmly on the front foot after President Trump announced that a deal with Iran had been reached, adding:

The move has given investors a clear reason to dial back some of the geopolitical risk premium that has hung over markets, especially as the Strait of Hormuz is expected to reopen and oil prices move sharply lower.

Energy prices have been one of the clearest transmission channels from Middle East tensions into inflation, bond yields and equity sentiment, and there is likely to be a concerted effort to get prices down even further once this deal is finalised.

There are still details to be ironed out before markets can fully trust the agreement, but for now the direction of travel is clear: lower oil, calmer nerves and a renewed appetite for risk.

Shares in oil companies are falling, though – BP and Shell are both down 3.7%, as investors anticipate an end to their earnngs boost from the Iran war.

Boom! Britain’s stock market has hit a near-two month high at the start of trading, as investors welcome the breakthrough between the US and Iran to end the Middle East conflict.

The FTSE 100 blue-chip share index has jumped by 99 points, or almost 1%, at the start of trading to 10,570 points, its highest level since 21 April.

Engineering firm Rolls-Royce, which makes and services jet engines, is the top riser on the FTSE 100, up 5.5%, followed by British Airways parent company IAG, up 4.8%.

Two bits of good news for Britons who don’t own their homes have been revealed, with data showing a drop in house prices in June as well as fewer tenants facing rent hikes last month.

Figures from Rightmove showed the average price of property coming on the to market fell by 0.6% or £2,113 to £376,191, the biggest June fall in fourteen years, with prices 0.5% below this time in 2025. The biggest drops were seen in southern England and Wales, and in asking prices for flats rather than houses.

The property site said the number of homes for sale was still at historically high levels for summer, making it more of a buyer’s market. Mortgage affordability has also improved slightly this month, with the average two-year fixed rate deal dropping about 0.1 percentage points to 5.07%, it said.

Meanwhile, figures suggest that the introduction of the Renters Right Act may already be seeing results in terms of keeping rents down for tenants.

The new law came into force at the start of May and means landlords can only increase rents for sitting tenants once a year. According to Hamptons monthly lettings index, the number of tenants who saw their rent rise was down 23% from the same month last year. Hamptons said if the rest of the year saw similar change, it would expect only 31% of sitting tenants to face increases, compared to 40%-50% in previous years.

However, the agency warned that rent rises in Scotland, where landlords have been operating under a similar system for longer, exceeded the national average. Sitting tenants who faced rent rises had an average increase of 5.4% in May, but the figure reached 7.7% in Scotland, albeit for a lower absolute rent - £952 – than the Great Britain average of £1375.

There are strong gains across Asia-Pacific markets today, as investors welcome the deal between the US and Iran.

Japan’s Nikkei share index has leapt by 5%, as has South Korea’s KOSPI, while China’s CSI300 index is 1.9% higher.

Jim Reid, market strategist at Deutsche Bank, says:

Whilst the deal is very good news for markets it looks like tough conversations will have occur in the 60-day window to ensure the peace is sustainable. As an example, the Senate needs to approve any extensive sanction relief for Iran.

For now the can kicking exercise has been very well received by markets even after a strong US close on Friday where hopes were raised of a weekend signing

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

The peace deal agreed between Iran and the US is sending a wave of relief through the markets today.

Oil has tumbled 4%, and markets across the Asia-Pacific region have jumped, as investors anticipate the reopening of the strait of Hormuz.

Although it is unclear exactly what has been agreed – with the final text of their memorandum of understanding unpublished - Donald Trump’s claim that “oil will flow on both ends again for the region, and the world” is pushing down energy prices – a relief for busineses, consumers, politicians and central bankers alike.

Brent crude has fallen as low as $83.04, its lowest since 10 March, after the prime minister of Pakistan announced the US and Iran will sign a memorandum of understanding in Switzerland on Friday.

That still leaves Brent above its pre-war price of $72.48 a barrel, though.

Trump has indicated that the opening of the strait is contingent upon the signing of the peace deal, scheduled for Friday.

Iran’s Mehr state news, though, reported that the agreed memorandum of understanding calls for the reopening of the strait within 30 days under “Iranian arrangements” – an indication that Tehran hasn’t surrendered its control of the waterway.

Chris Weston of IG points out that there are still obstacles to overcome:

The probable reopening of the Strait of Hormuz later this week would represent a significant positive development. Markets had increasingly questioned how long inventory draws could offset supply disruptions and whether physical dislocations would begin weighing more heavily on risk assets. The focus now shifts towards understanding what normalisation of logistics could realistically look like, and how quickly shipping volumes can return to pre-conflict levels of 120 to 140 commercial vessels transiting eastbound and westbound each day.

There are still obstacles to overcome. Mines may need to be cleared, and there may be structural damage to refineries and export facilities around the region that will take time to repair and come back to pre-conflict capacity.

The agenda

• 10am BST: Eurozone trade balance for April

• 1.30pm BST: NY Empire State Manufacturing Index