Oil Prices Plummet as US-Iran Tensions Ease

Global markets breathed a sigh of relief on Monday as tensions between the US and Iran eased, leading to a decline in oil prices and a rise in stocks. Brent crude fell by as much as 7.4% to below $90 a barrel before paring losses, while MSCI's Asia Pacific equities gauge rose 0.4%. The dollar weakened against most of its Group-of-10 peers as investors grew more optimistic about the conflict.

The pause in hostilities comes after a recent escalation in the conflict, which had sent oil prices soaring and raised concerns about potential disruptions to Middle East energy supplies. Iranian and Omani officials held talks over shipping through the Strait of Hormuz, raising hopes that the key oil transit route may avoid further disruption.

The Federal Reserve's decision on interest rates this week is now a major focus for markets, with traders expecting a rate hike after the recent surge in oil prices fueled inflation concerns. However, some analysts believe the Fed will not raise rates due to doubts about whether billions of dollars being poured into artificial intelligence infrastructure will generate commensurate returns.

The Bank of England and the Bank of Japan are also set to make decisions on interest rate policy this week, with officials likely to emphasize vigilance over the inflationary impact of higher energy prices. Meanwhile, megacap technology companies such as Microsoft Corp. and Meta Platforms are due to release earnings reports, which could have a significant impact on the market's direction.