Bloomberg pondered the implications of China boosting crude purchases if the deal is ratified: File Image/Pixabay

A collective gasp of relief was heard throughout the investment community over the weekend and continuing into Monday, in the aftermath of the U.S. and Iran announcing it had reached a peace deal to be signed on Friday that would immediately re-open the Strait of Hormuz.

Accordingly, oil prices on Monday plummeted, with Brent shedding 5.4 percent to $82.61 per barrel, a level not seen since early March. 

Transportation companies that rely heavily on fossil fuels rallied, with United Airlines, American Airlines, and Carnival enjoying substantial gains on Wall Street.

Analysts also believed that the U.S./Iran peace deal would almost certainly compel the U.S. Federal Reserve to leave its main interest rate steady when it meets on Wednesday.

U.S. president Donald Trump told media on Monday, “I think a lot of great things are going to happen in the Middle East right now….and very importantly, the oil is plummeting down and the stock market is shooting up like a rocket today, like record kind of numbers.”

Trump also wrote on social media, that the strait would open after the peace deal was signed and “for purposes of mine removal, oil will flow on both ends again for the Region, and the World!”

Barring any mishaps (Israel’s aggression against Lebanon is viewed as the main potential disruptor of the tentative peace agreement), full disclosure of the deal’s particulars will be made public, but in the meantime details are unclear, including the exact timing of the reopening of the strait, who will oversee safe passage and whether any conditions will be applied.

Reportedly, a 60-day negotiating period for a final deal tackling wider issues such as Tehran’s nuclear programme and sanctions relief will commence shortly.

Still, some analysts weary of the relentless start-and-stop nature of the negotiations between Washington and Tehran these past weeks warned that oil trading sessions leading up to this Friday would be fraught with uncertainty and volatility.

That was the message delivered by Vandana Hari, founder of Vanda Insights, who said the lack of detail on what has been agreed was "likely to inject unease and uncertainty into the market".

Bloomberg also struck a gloomy note on Monday, pointing out that the reopening of the Hormuz could prompt China to return to buying more crude after months of multi-year-low purchases, and that “Any recovery in Chinese oil demand — particularly if energy flows remain constrained — could tighten global energy markets, reignite inflation pressures and complicate the task facing central banks.”