Signs of a potential agreement between Washington and Tehran fueled expectations for the reopening of the Strait of Hormuz, sending oil prices tumbling below $100 a barrel on Monday and lifting global stock markets.

Following reports of progress in Middle East peace talks over the weekend, international benchmark Brent crude and West Texas Intermediate futures contracts both fell by more than 5%.

U.S. Secretary of State Rubio, during a visit to New Delhi on Monday, stated that a deal could be announced "today." This came after President Donald Trump noted that negotiations were proceeding "in an orderly and constructive manner," but cautioned that U.S. negotiators had been instructed "not to rush into an agreement."

However, many investors are betting that Trump is eager to announce a deal to restore oil tanker traffic through the Strait of Hormuz and help curb fuel prices ahead of the Northern Hemisphere's summer travel season. Optimism was further bolstered by reports that Iran's chief negotiator, Mohammad Bagher Ghalibaf, arrived in Qatar on Monday as part of a "diplomatic process."

"The reports from Donald Trump suggest a memorandum of understanding is 'broadly agreed,' with specifics to be released at a later stage," said Chris Weston, Head of Research at Pepperstone.

This prospect spurred a broad rally across Asian markets. Tokyo's stock market surged 2.9%, breaking through the 65,000-point level for the first time. In Europe, strong buying was seen in Paris and Frankfurt, though overall trading was subdued as several continental markets were closed for a holiday and London was shut for the Spring Bank Holiday. Wall Street was also closed on Monday for Memorial Day.

Later this week, investors will closely monitor the Federal Reserve's and its new Chair Kevin Warsh's reaction to key consumer inflation data and its potential implications for interest rates.

Many economists warn that persistent price increases stemming from the U.S. and Israeli conflict with Iran will limit the Fed's ability to cut rates to stimulate U.S. economic growth—a policy Trump has repeatedly called for in recent months.

"The inflation narrative remains central to the whole picture," said Stephen Innes of SPI Asset Management. "Following several stronger-than-expected consumer and producer inflation reports earlier this month, there is growing concern that high oil prices and supply disruptions linked to the Middle East conflict are beginning to seep into the broader inflation transmission chain."

In Europe, higher inflation is widely expected to lead the European Central Bank to raise interest rates in the coming weeks, pushing up borrowing costs while economic growth remains weak.

Nevertheless, strong corporate earnings and an AI-driven tech stock rally are encouraging investors to look past inflation risks. Despite the economic shock from the Middle East war, benchmark U.S. stock indices continue to trade near historic highs.