Oil prices fell to a three-month low on Friday after U.S. President Donald Trump again said a deal to end the war in Iran could be close. Against that backdrop, global markets rose, while Wall Street awaited the first trading in shares of Elon Musk’s SpaceX after a record IPO.
Brent fell 5% to $85.80 a barrel—the lowest level since the early stage of the Middle East conflict in March. It later recovered some of its losses and traded around $88.21.
The decline began after Trump said the final points of an agreement with Tehran had been approved by “all parties.” It was the clearest signal yet that a preliminary deal was nearing, one that would extend the fragile ceasefire and restore operations in the Strait of Hormuz.
U.S. WTI was down 2.5% by the morning trading session in New York, at $85.47 a barrel, after a sharper fall earlier in the day.
“Despite a string of false promises, financial markets appear to be reacting as if a deal is already in the works,” said Kallum Pickering, chief economist at brokerage Peel Hunt.
The rally spread across stock markets worldwide as investors bet on a durable peace agreement. The pan-European Stoxx 600 rose 1.2%, while Britain’s FTSE 100 gained 1%.
S&P 500 futures pointed to a 0.2% rise. The index gained 1.8% the previous day on expectations of a deal. The tech-heavy Nasdaq Composite closed up 2.5%.
After Trump’s statement, traders lowered their expectations for the speed of rate increases by major central banks. Derivatives markets now fully price in the Fed’s first quarter-point rate increase not in December, but in March next year. For the Bank of England, the equivalent expectation shifted from September to November.
European government bonds rose. The yield on 10-year UK bonds fell 0.05 percentage points to 4.87%, while the yield on Italian bonds of the same maturity dropped 0.04 points to 3.76%.
Some investors, however, remained cautious, given earlier statements and subsequent failures in Trump’s attempts to reach an agreement with a longtime U.S. adversary.
“A certain degree of skepticism is warranted,” said Trevor Greetham, head of multi-asset investing at Royal London Asset Management.
The market move coincided with SpaceX’s preparations to go public on Friday. For markets, it caps a volatile week in which concerns over the war in Iran and expectations of a large volume of new listings tested the strength of a powerful AI-driven rally.
In Asia, technology markets rose more strongly, echoing Thursday’s tech rebound on Wall Street. South Korea’s Kospi, which has been highly volatile since the start of the year, climbed 4.6%, while Japan’s Nikkei 225 rose 2.8%.
The rise in Asian markets with a large share of chipmakers is being supported by expectations that these companies will become key players in building infrastructure for AI. The Kospi has nearly doubled since the start of the year and, for the second year in a row, remains the best-performing major market in the world.
Memory-chip makers Samsung Electronics and SK Hynix, after sharp gains, now account for more than half of the Kospi index. Kioxia, Japan’s largest flash-memory maker, on Friday overtook Toyota to become the country’s most valuable company after rising more than 3,700% over the past 12 months.
Interest in AI has supported markets in Japan, South Korea and Taiwan, but they have also remained vulnerable because of uncertainty over energy supplies amid the war in Iran. All three Asian economies import a significant share of their oil and gas.
Namook Lee, chairman of the Korean Corporate Governance Forum, said market sentiment had improved because of expectations of a near-term agreement to end the war and assumptions that China would likely increase investment in AI infrastructure.
The Kospi remains especially volatile: on three of the past five trading days, the index moved by more than 7%. Since the start of the year, trading curbs have been triggered 24 times. By comparison, there were 26 such triggers in all of 2008, at the height of the global financial crisis.
“I have not seen a market with this kind of volatility in 40 years in the financial industry,” Lee said. “Market concentration in chipmakers’ shares is rising, while market breadth is narrowing.”