Stocks Rise and Oil Drops on the US-Iran Ceasefire Plan – Asia Market Wrap
Oil sank to its lowest level in nearly six years, while stocks jumped as the US and Iran agreed to a two-week truce, providing markets with a breather from the instability caused by the Middle East crisis.
West Texas Intermediate fell as much as 19% after Trump decided to halt bombing of Iran in an effort to restore oil flows through the Strait of Hormuz. Iran stated that safe transit through the river would be available during that time. Global benchmark Brent crude fell 13% to $94.50 per barrel.
MSCI’s Asia Pacific equities index rose 4.9% to a three-week high, with traders betting that reduced oil prices will help to curb inflation and boost economic development. Stock-index futures for Wall Street gauges increased by more than 2.5%, while European contracts jumped by 5.5%. Treasuries rose as lessening pricing pressures prompted traders to renew their wagers on Fed rate cuts. The Dollar index, which had emerged as the preferred safe haven during the crisis, declined 0.8%, while gold gained.
The ceasefire proposal, revealed just hours before a Trump deadline to escalate bombing of Iran, is recovering risk sentiment following instability that has driven equities lower and sent numerous indexes into correction territory since the Middle East conflict began six weeks ago. For the cross-asset relief surge to endure, markets would need assurance that the ceasefire will last and energy flows through the Strait of Hormuz will return to normal, analysts said.
Gold, a non-yielding asset, rose 2% to around $4,800 per ounce, since it normally benefits from reduced interest rates. Silver rose 4.5% to more than $76 per ounce.
