Truce makes oil cheaper
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The price of a barrel of oil fell by more than 15% after Washington and Tehran announced a two-week ceasefire, to the great relief of Asian stock markets, which rose in unison, AFP reports, as reported by Agerpres.
The price of West Texas Intermediate (WTI) crude for delivery in May, the American benchmark, had reached $96.54/barrel. The price of Brent crude from the North Sea for delivery in June, the global benchmark, reached $94.92/barrel. In both cases, it returned below the symbolic threshold of $100, on a market relieved by the prospect of a truce in Iran.
“I agree to suspend bombings and attacks against Iran for two weeks,” the US president declared on his Truth Social platform a little over an hour before his ultimatum expired.
Tehran, for its part, announced negotiations with the US side to end the war starting on Friday for two weeks, agreeing to reopen the Strait of Hormuz if the Israeli-American attacks cease. Normally, about a fifth of the world’s oil passes through this strategic waterway.
“After a period of high tension in the markets, the immediate reaction is understandable: the ceasefire, and especially the partial reopening of the Strait of Hormuz, removes the main short-term risk related to oil and brings significant relief to risky assets,” notes Charu Chanana, an analyst at Saxo Markets.
“Once the White House has backed down and replaced the imminent escalation with a conditional ceasefire for two weeks, the oil market is starting to function more smoothly and in a more balanced way, with the risk premium” of recent days evaporating, says Stephen Innes of SPI Asset Management.
But everyone agrees that caution is still advised regarding the sustainability of this lull.
“For this development to be confirmed, traders will need more than just diplomatic statements. They will need to see a real resumption of traffic in the Strait of Hormuz. Until it is visibly reopened, it will be just a matter of easing positions, rather than a sustainable reassessment of prices,” warns Stephen Innes.
“The decline in oil prices is reducing the pressure on regional risk sentiment (in Asia), especially in markets most sensitive to shocks related to energy imports (…) Stock markets simply need a break,” says Stephen Innes.
Gold prices, which have been battered in recent weeks by the prospect of rising inflation and interest rate hikes by central banks, rebounded on the announcement of a ceasefire in Iran. The precious metal reached $4,814 an ounce.
At the same time, the US dollar fell sharply against both the euro and the yen, in line with the decline in oil prices. The US currency fell 0.80% against the Japanese yen, reaching 158.34 yen per dollar.
