US President Donald Trump said he agreed to suspend bombing and attacks on Iran for two weeks and a long-term peace agreement was in progress.
Global markets have been rattled since the US and Israel attacked Iran at the end of February, leading Tehran to effectively close the Strait of Hormuz, a key waterway used to transit one-fifth of the world's oil and gas.
US crude futures fell around 16.5 per cent to $94 a barrel, S&P 500 futures leapt over two per cent and the dollar fell broadly, having been the haven of choice for investors during the tumult.
"Markets have been predicting that Trump was looking for an off-ramp in Iran," said Jamie Cox, managing partner at Harris Financial Group. "Today, he got one and took it."
Futures pointed to broad gains for Asia's stock markets on Wednesday, which have been beaten down by war and soaring energy prices, and 10-year US Treasury futures jumped about 15 ticks.
The risk-sensitive Australian dollar rose 1.3 per cent to above $0.70 and the euro gained 0.76 per cent to $1.1683. Cryptocurrencies also rose.
Trump had set a late Tuesday, US time, deadline for a deal with Iran to be reached, threatening to destroy every bridge and power plant in the country if Iran did not reopen the Strait of Hormuz. Iran had said it would retaliate against US allies in the Gulf.
The six-week conflict has sent oil prices surging, stoked worries of inflation and upended the global rates outlook with countries and companies scrambling to adjust to the energy shock.
In commodities, gold prices rose over two per cent to $4,812 per ounce.
