Stock markets climbed and oil prices tumbled on rekindled hopes for a deal to end the Middle East war and reopen the Strait of Hormuz, reports AFP.

Wall Street’s main indices climbed, with both the S&P 500 and the Nasdaq now back at levels from before the US and Israel began bombing Iran on February 28.

European equity markets also rose, although London advanced only 0.3 per cent as the retreat in oil prices from $100 a barrel weighed on the shares of energy majors BP and Shell.

Asia’s leading stock markets closed with sizeable gains, while the dollar, seen as a haven in times of market turmoil, dropped against its main rivals.

Investors greeted US-mediated talks in Washington that set a plan for direct negotiations between Israel and Lebanon.

Investors are “pricing in victory,” said analyst David Morrison at Trade Nation.

He said many believe the end of the conflict with Iran is a question of days, weeks or months rather than years.

“Nobody wants to be under-exposed to risk assets, let alone be short, should the war suddenly conclude, or even if the Strait of Hormuz was unblocked,” Morrison said.

But Tom Cahill, chief investment officer at Ventura Wealth Management, said the market is “overreacting” in rising so much.

“There are still a lot of question marks as to whether a true agreement is to be had between the United States and Iran,” said Cahill, who also worries that companies will cite the war as a factor in lowering their earnings forecasts.