The best part about this movie is that there isn't a single scene in it that makes a bit of sense, either internally or in conjunction with the rest of the movie.
Some guys come out of nowhere and do evil stuff.
Deathstalker comes out of nowhere, complains about people being around his horse, and offers the woman a dubious rescue. Deathstalker apparently refuses, but then he's off to go to the tournament in the next scene. Deathstalker meets up with a witch, who tells him he has to go find a guy who lives in a hole. Deathstalker tells her not to speak in riddles. The guy gives him a special sword, which is apparently one of the three items of creation, or something like that.