Oil prices dropped and stock markets started to climb after comments from US President Donald Trump raised hopes for a quick end to the Iran war.
Oil prices tumbled following US President Donald Trump's statement that Washington "postponed any and all military strikes against Iranian power plants and energy infrastructure" for five days.
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This comes after Trump warned over the weekend that the US would "obliterate" Iran's power plants if it does not fully open the Strait of Hormuz within 48 hours, prompting Tehran to say it would respond to any such strike with attacks on energy and desalination assets in the region.
Iran's foreign ministry has since denied any dialogue with the US, according to state-affiliated media outlets.
Trump posted on social media on Monday that the US had "productive conversations" with Iran over the weekend "regarding a complete and total resolution of our hostilities in the Middle East".
The US president also hinted that the talks would continue throughout the week.
Leading European stock indexes started gaining after opening at a loss on Monday, with the DAX in Frankfurt jumping to more than 2.4%, the FTSE in London up by 0.4% and the CAC 40 in Paris gaining nearly 1.7% after the comments were published.
Earlier on Monday, European stock markets as well as Asians saw major declines, gold futures dropped 8% and crude oil prices continued to climb amid heightened uncertainty in the Middle East.
After Trump's comments, benchmark US crude dropped below $91 a barrel, from above $100 earlier. Brent crude, the international standard, lost approximately 10% and was trading at nearly $104 a barrel early morning in Europe from more than $113 in the morning.
The price of Brent crude has yo-yoed lately from about $70 per barrel before the war began to as high as $119.50.
Earlier on Monday, the International Energy Agency warned that the global economy faces a "major, major threat" because of the Iran war and that at least 40 energy assets across nine countries were damaged.
In Europe, the benchmark natural gas futures fell below €57 per MWh from €60 at the market open.
In Asia, stock markets closed with significant losses, impacted by the uncertainty around the Middle East crisis, with Japan's benchmark Nikkei 225 dropping 3.5%. In Taiwan, the Taiex shed 2.5%, South Korea's Kospi dropped 6.5%, Hong Kong's Hang Seng slipped 3.8%, and the Shanghai Composite declined 3.6%.
Higher oil prices, which also shook stock markets on Friday, dashed hopes for a possible upcoming cut in interest rates by the US Federal Reserve, analysts said.
Before the war, traders were betting that the Fed would cut rates at least twice this year. Central banks in the EU, Japan and the United Kingdom also recently held their interest rates steady.
The S&P 500 fell 1.5% Friday to close its fourth straight losing week, its longest such streak in a year.
The Dow Jones Industrial Average dropped 443 points, or 1%, and the Nasdaq Composite tumbled 2%.
On Wall Street, roughly three out of every four stocks in the S&P 500 fell on Friday.
Stocks of smaller companies, which can feel the pinch of higher interest rates more than their bigger rivals, led the way lower. The Russell 2000 index of smaller stocks fell a market-leading 2.3%.
In the bond market, the yield on the 10-year US Treasury finished last week with a jump to 4.38% Friday from 4.25% late Thursday and from just 3.97% before the war started.
The two-year Treasury yield, which more closely tracks expectations for what the Fed might do, rose to 3.88% from 3.79%.
In currency trading, the dollar lost against the euro after Trump's comments, one euro traded at $1.1582, the pound was up by 0.3% and cost $1.3380, while a dollar cost ¥158.75 early afternoon in Europe.
In other dealings, gold was trading at $4,398 after the news, nearly 4% down.
