Oil prices decreased while stocks and bonds increased on Wednesday due to a two-week ceasefire in the Middle East, which raised hopes for the return of oil and gas flows through the Strait of Hormuz. This news followed weeks of market fluctuations caused by U. S. and Israeli attacks on Iran in late February, which strained access to the waterway that carries approximately 20% of the world’s energy supplies. U. S. President Donald Trump agreed to the ceasefire shortly before a deadline, warning Iran to reopen the strait or face severe attacks.
The market’s response was rapid, with U. S. crude futures dropping about 15% to $96.31 a barrel, and Brent futures falling 13% to $94.71 per barrel. S&P 500 futures rose 2.5%, and European futures jumped more than 5%. U. S. Treasuries and futures for German bunds and French OATs also increased. The U. S. dollar fell significantly as it had previously been a safe haven during the turmoil. In Asia, Japan’s Nikkei rose about 5%, and South Korea’s KOSPI increased by 6%, causing a brief trading halt. Overall, the MSCI Asia-Pacific index outside Japan rose 4%.
Analysts suggested the ceasefire might indicate that the worst of the conflict is over, allowing the markets to rally. However, investors remained cautious about taking major risks until a more enduring resolution is evident. Gold prices increased by 2.5%, while the Australian dollar and euro gained against the dollar, which hit a one-month low. New Zealand’s central bank kept its policy rate steady but indicated potential future actions if inflation rises. Some analysts expressed skepticism about lasting peace, predicting the conflict could extend into June. U. S. Treasuries surged, as traders considered the possibility of future rate cuts by the Federal Reserve, although uncertainty about oil prices returning to pre-war levels tempered enthusiasm.
With information from Reuters
