Oil prices dropped sharply, bonds gained, and stocks rallied after US President Donald Trump announced a two-week ceasefire involving Iran, fueling a relief surge across global markets. Investors welcomed the prospect of resumed oil and gas shipments through the strategic Strait of Hormuz.
Trump said on Tuesday he had agreed to suspend attacks on Iran for two weeks, adding that a long-term peace deal was in the works.
In response, Iran stated it would halt its own attacks if hostilities against it ceased, and that safe transit through the Strait of Hormuz – a vital passage for one-fifth of the world’s oil and gas – would be possible for two weeks in coordination with the Iranian Armed Forces, reports Al Jazeera.
Global markets had been on edge since the US and Israel launched attacks on Iran in late February, prompting Tehran to effectively shut the Strait of Hormuz.
US crude futures tumbled about 16.5 percent to $94 a barrel. S&P 500 futures jumped more than 2 percent, while the US dollar broadly weakened on Wednesday, reversing its recent status as a safe-haven bet.
“Markets have been anticipating that Trump was looking for an exit ramp in Iran,” said Jamie Cox, managing partner at Harris Financial Group. “Today, he found one and took it.”
Futures indicated broad gains across Asian stock markets, which had been battered by the conflict and surging energy prices. Ten-year US Treasury futures rose about 15 ticks.
The announcement came via social media, where Trump had written “a whole civilisation will die tonight” if his demands were not met.
US -Israeli campaign against Iran had driven the steepest monthly oil price spike in history, with crude surging 50 percent in March.
Trump said the US had received a 10-point proposal from Iran, calling it a workable basis for negotiations. He noted the parties were “very far along” in reaching a definitive long-term peace agreement.
“It’s a good start and could pave the way to a more permanent reopening – but there are still lots of ‘ifs’ to work out,” wrote Tony Sycamore, an analyst at IG, in a note.
