Shares rally, oil slumps as Iran-Israel ceasefire goes into effect
Brent futures had already slid 7 per cent on Monday and U.S. shares jumped after Iran made a token retaliation against a U.S. base and signalled it was done for now.
With the immediate threat to the vital Strait of Hormuz shipping lane seemingly over, the global benchmark was last at $67.68 a barrel, its lowest since June 11. U.S. crude futures dropped 3.6 per cent to $66.02 a barrel.
"With markets now viewing the escalation risk as over, market attention is likely to shift towards the looming tariff deadline in two weeks' time," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
"Our sense is that the quicker than expected resolution to the Middle East conflict leads to expectations for a swifter resolution on tariffs and trade deals."
But for now, equity markets were basking in the eased geopolitical tensions.
Risk assets rallied, with S&P 500 futures up 1 per cent and Nasdaq futures 1.3 per cent higher. Europe's Stoxx 600 gained 1.3 per cent in early trade, with travel stocks, such as airlines surging 4 per cent while oil and gas names shed 3 per cent.
Earlier in the day MSCI's broadest index of Asia-Pacific shares outside Japan jumped 2.2 per cent while Japan's Nikkei rallied 1.1 per cent.
On trade, two sources told Reuters that Japan's tariff negotiator Ryosei Akazawa was arranging his seventh visit to the United States for as early as June 26, aiming to end tariffs that are hurting Japan's economy.
Government bonds largely looked through the news. The war has been a challenge for bond traders to process as they have had to weigh safe haven flows against the effect of higher oil prices on inflation.
RATE CUTS APPROACHING?
Federal Reserve Vice Chair for Supervision Michelle Bowman said the time to cut interest rates was getting nearer as risks to the job market may be on the rise.
That followed Fed Governor Christopher Waller saying on Friday he would consider a rate cut at the July 29-30 meeting.
Fed Chair Jerome Powell will have his own chance to comment when appearing before Congress later on Tuesday and, so far, has been more cautious about a near-term easing.
Markets still only imply around a 22 per cent chance the Fed will cut at its next meeting on July 30, but a September cut is near to fully priced.
Ten-year Treasury yields were mostly steady at 4.33 per cent, having declined 5 bps overnight. Germany's 10-year yield was flat at 3.52 per cent
News of the ceasefire saw the dollar extend an overnight retreat and slip 0.7 per cent to 145.43 yen , having come off a six-week high of 148 yen overnight.
The euro rose 0.2 per cent to $1.1602 on Tuesday, having gained 0.5 per cent overnight.
The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter.
The risk-on mood saw gold prices ease 1 per cent to $3,333 an ounce.
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Business Times
35 minutes ago
- Business Times
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