The benchmark oil price fell below $US90 a barrel for the first time in more than a month after Iran announced on Friday night, AEST, that the Strait of Hormuz would be open to commercial shipping for the duration of a 10-day truce between Israel and Lebanon.
But traders were left in limbo by Sunday after Iran again closed the vital waterway in retaliation to an ongoing US blockade on Iran's use of the strait, leaving hundreds of vessels stuck in the Persian Gulf.
Eyes will be fixed on Islamabad, which has been hosting talks between the warring parties, as the clock ticks down to the end of a fragile ceasefire between the US and Iran on Wednesday.
Prime Minister Anthony Albanese on Saturday stressed the strait needed to be kept open permanently and international plans to restore maritime security would continue until then.
With the last ships allowed to pass before the war started due to unload their cargoes in the coming days,shortages of vital commodities such as oil, helium and fertiliser are set to worsen in the short-term.
Before Saturday's announcement, Commonwealth Bank commodities analyst Vivek Dhar anticipated the benchmark Brent oil price could rise as high as $US135 a barrel by the end of April, from just under $US100.
But with the price sitting at a touch under $US92 a barrel on Sunday, markets remain bullish.Â
Shares hit record highs on Wall Street after US President Donald Trump said the prospects of a deal were "looking very good", AMP chief economist Shane Oliver noted.
"We continue to lean to the view that Trump will find a way to stay on the off-ramp from the war," he said.
Pressure on the president to back down is increasing, with opinion polling showing little support for the war and falling approval ratings as affordability begins to bite.
"The Republicans are seeing increasing odds that they will lose both the House and the Senate in the mid-terms," Dr Oliver said.
"And likewise, pressure on Iran to reach a deal is high, as the US switch from bombing (which can unite a population) to even tougher economic sanctions via the blockade of Iranian oil exports will intensify popular discontent with the Iranian government."
Wall Street investors were optimistic about a deal to end the war and the decision to open the Strait of Hormuz.
Two of the three main indexes rallied to a third successive record close in New York on Friday, while the other marked its highest finish since late February.
The Dow Jones Industrial Average rose 1.79 per cent to 49,447.43, the S&P 500 gained 1.20 per cent to 7,126.06 and the Nasdaq Composite gained 1.52 per cent to 24,468.48.
Australian share futures surged 82 points, or 0.91 per cent, to 12,680.
Preceding the announced reopening of Hormuz, the S&P/ASX200 fell 8.1 points on Friday, down 0.09 per cent to 8,946.9, as the broader All Ordinaries lost five points, or 0.05 per cent, to 9,168.5.
On Tuesday, ANZ and Roy Morgan's weekly consumer confidence index will give another look at how Australian households are responding to the crisis and the prospect of further Reserve Bank interest rate hikes.
Reserve Bank officials Sarah Hunter and Andrew Hauser spoke in Washington DC during the previous week, reiterating the importance of inflation expectations remaining anchored to avoid the risk of runaway price growth similar to the 1970s and 1980s.
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