Oil Price Decline Sends Global Markets Higher Ahead of Fed Meeting

Global markets rallied on Monday as a pause in fighting in the Gulf led to a sharp decline in oil prices, easing inflation risks and boosting bonds. The drop in oil prices saw Brent crude fall 5.2% to $91.73 a barrel, while US crude dropped 5.4% to $84.45.

Sally Auld, group chief economist at NAB, said that developments in the Middle East have moved in a positive direction over the weekend, adding credibility to the notion that oil above $100 a barrel induces de-escalatory behavior from both sides.

The pullback in oil prices provided some relief from inflation fears and led markets to slightly pare the probability of rate hikes from the Federal Reserve. The central bank meets on Wednesday, with markets implying around a one-in-three chance of a rate rise.