Stocks soared, bonds rallied and the dollar wallowed on Wednesday, as hopes of a de-escalation in the Iran conflict fuelled the biggest rebound in regional equities in more than three years.
Oil prices dropped after US president Donald Trump again signalled the potential end to the Iran war that’s roiled markets, even as the Strait of Hormuz remains largely closed and more US troops arrived in the region.
Brent oil futures slid more than 5 per cent and fell below $100 a barrel for the first time in a week, trading at $99.07 having risen almost 2 per cent earlier in the day. West Texas Intermediate was trading near $98 a barrel.
Stock markets also jumped. Europe’s STOXX 600 jumped more than 2 per cent on opening with all major sectors in the green except energy. Most major regional bourses traded around 2 per cent higher, with Germany’s DAX leading with a 2.7 per cent rise. Dublin’s Iseq was 1.7 per cent stronger.
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Oil price-sensitive travel stocks jumped 4.2 per cent and led sectors higher. Heavyweight banks climbed 3.9 per cent. The Stoxx energy index was 0.7 per cent weaker.
“We’ll be leaving very soon,” Trump told reporters at the White House on Tuesday, saying the exit could take place “within two weeks, maybe two weeks, maybe three.”
He also indicated an agreement with Tehran may be reached but wasn’t necessary for the war to end. Trump has regularly vacillated between saying an Iran deal is imminent and warning he’s prepared to ramp up military operations.
The president will give an address to the nation later on Wednesday to provide an update on Iran, White House press secretary Karoline Leavitt said.
Even if the war ended within Trump’s time frame, it would take time for normal flows to resume through the crucial Strait of Hormuz and some energy facilities have been damaged during the conflict.
Overnight, Qatar Energy confirmed a missile strike on a fuel oil tanker in the Strait of Hormuz, adding that no one had been injured and there had been no environmental impact.
“The market is complacent thinking that things normalise quite quickly, and I think that complacency is a risk factor for markets,” Dominic Schnider, head of commodities at UBS Group AG’s wealth management unit, said in a Bloomberg TV interview. – Bloomberg / Reuters
