According to Karen Ward of JPMorgan, a significant decline in oil prices could reignite the broad market rally that was abruptly interrupted by the Iran conflict, serving as a powerful catalyst for stock markets.

Ward, the Chief Market Strategist for EMEA at JPMorgan Asset Management, stated that oil prices could fall to $70 per barrel in the coming weeks. This potential drop is linked to an emerging US-Iran agreement that is expected to unfreeze assets and increase global oil supply. She added that the potential supply increase is not limited to Iran, as OPEC's cohesion is weakening and Gulf states may look to monetize reserves at current price levels.

Such a development would create a "huge tailwind" for equity markets and could prompt central banks to cut interest rates. This follows the European Central Bank's recent 25-basis-point rate hike last week to address inflationary pressures.

"The entire rotation we saw last year, whether by sector or by geography, stalled on February 27th," Ward said. "The idea that the market has moved on from the Iran conflict is actually wrong, because the narrative has completely changed. So now it's going to reverse, and you're going to see that rotation, that broadening."

She indicated that the agreement, set to be formally signed on Friday, appears structured to incentivize compliance from both sides. She expects the deal to hold, partly because China, as the largest buyer of oil shipped through the Strait of Hormuz, is unlikely to allow Iran to persistently close the strait given its own domestic economic weakness. Furthermore, Iran shifting its oil sales from the black market to official channels could also accelerate the decline in oil prices.

Brent crude fell sharply on Monday, dropping over 5% to below $83 per barrel. However, some traders and analysts remain cautious, highlighting the lack of detail in the agreement and obstacles to resuming shipping through the Strait of Hormuz.

Ward views European equities as undervalued, citing a shift in tone from Brussels towards emphasizing the urgency of growth following a period of restrictive regulation and government policy. "In an overall optimistic market, there is still too much pessimism priced in there," she stated.