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Shares rally, oil slumps as Iran-Israel ceasefire goes into effect
Shares rally, oil slumps as Iran-Israel ceasefire goes into effect

CNA

time24-06-2025

  • Business
  • CNA

Shares rally, oil slumps as Iran-Israel ceasefire goes into effect

SYDNEY :Oil tumbled 4 per cent, global shares surged and the dollar dropped on Tuesday as U.S. President Donald Trump said a ceasefire between Israel and Iran was in place, a dramatic turnaround after the U.S. bombed Iran's nuclear sites over the weekend. 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.

What influences crude oil more? US bombs or Iran's silent allies
What influences crude oil more? US bombs or Iran's silent allies

Reuters

time24-06-2025

  • Business
  • Reuters

What influences crude oil more? US bombs or Iran's silent allies

LAUNCESTON, Australia, June 24 (Reuters) - Crude oil's sharp reversal of the Israel-Iran war premium shows the power of a few words from a key player to move the market, but in doing so it also masks the greater influence of those who stay largely silent. Global benchmark Brent futures plunged after U.S. President Donald Trump said a "complete and total" ceasefire between Israel and Iran will go into effect. Brent ended at $71.48 a barrel on Monday, down 7.2% from its previous close and having given up its earlier rally that saw it climb as high as $81.40, the most since January 17. Crude prices had surged early on Monday amid worries Iran would respond to the U.S. joining Israel's attack by bombing three nuclear facilities. Once again media reports overflowed with concerns that Iran would try to block the Strait of Hormuz through which about 20% of global crude oil and liquefied natural gas (LNG) passes daily, or that Tehran would target U.S. military bases in the region. In the end Iran's response was restricted to an announced strike on a U.S. base in Qatar, which turned out to be merely symbolic as the missiles were mostly intercepted and only limited damage was reported. The price of crude continued to weaken in early Asian trade on Tuesday, dropping as low as $68.23 a barrel, down 4.4% and back to the level it was at on June 12, the day before Israel started its bombing campaign against Iran. There is little doubt Trump will claim credit for the ceasefire between Israel and Iran, and likely point to the U.S. bombing of Iran's nuclear facilities and Tehran's limited response as proof he made the right choice. Certainly the U.S. entry into the conflict would have altered the calculations of Iran's rulers. But if it is the case that Tehran has backed down, was it because Trump called for Iran's total surrender, or was it because of the influence of what could be termed the more discreet players. It's worth noting that Iran's major allies, China, Russia and perhaps even India, did little more than offer pro-forma statements calling for an end to hostilities after the U.S. bombing. China is probably Iran's most important ally, as it is the only major buyer of its crude oil, which has been sanctioned by the United States. But the most strident China got in condemning the U.S. attack was the country's ambassador to the United Nations saying the involved parties, especially Israel, "should immediately cease fire to prevent the situation from escalating and avoid the spillover of war." While the ambassador to the United Nations is a senior diplomatic post, it's important that China didn't use a more important member of government to condemn the United States, and its support of Iran seemed muted at best. What Tehran probably discovered is that China's friendship is largely conditional on keeping oil flowing unhindered through the Strait of Hormuz, and also rapidly de-escalating so that prices can lose the risk premium. This was likely the same message delivered to Iranian President Masoud Pezeshkian by Indian Prime Minister Narendra Modi in a phone call on June 22. It's also likely that numerous other countries in the Middle East were quietly giving the message that it would be in nobody's interests for there to be any attacks on crude production and export infrastructure, or on shipping. What are the lessons from the 12-day Israeli campaign against Iran? The first is that crude oil prices still respond to geopolitical risks and moves tend to be volatile, short-lived and likely overstated. The second is that once again the shared self-interest of keeping oil flowing was in evidence, making it always likely that the risk premium in the oil price would be fleeting. The third is that Iran looks considerably weaker today than it did two weeks ago, but there is still much uncertainty as to what this means for the future of its rulers and their nuclear ambitions. The fourth is that despite Trump's bombast and hyperbole, there is little reason to believe that the Middle East is now any safer or more stable. Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis of everything from swap rates to soybeans. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, opens new tab and X, opens new tab. The views expressed here are those of the author, a columnist for Reuters.

Trump's Airstrikes on Iran Leave Oil Market Poised for Surge
Trump's Airstrikes on Iran Leave Oil Market Poised for Surge

Yahoo

time22-06-2025

  • Business
  • Yahoo

Trump's Airstrikes on Iran Leave Oil Market Poised for Surge

(Bloomberg) -- The oil market has been wrestling for days with Donald Trump's next act in an escalating Middle East conflict. Now American jets have struck Iran's three main nuclear sites, a move that leaves traders preparing for a price surge — but still guessing where the crisis goes from here. Bezos Wedding Draws Protests, Soul-Searching Over Tourism in Venice One Architect's Quest to Save Mumbai's Heritage From Disappearing JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown In a wild week, Brent futures have jumped 11% since Israel attacked its nemesis, but with sharp moves up and down from one day to the next. That rise is expected to restart on Monday, after the US assault — which targeted sites at Fordow, Natanz, and Esfahan — dramatically raised the stakes in a region that accounts for a third of global oil output. From frenzied options markets, to soaring freight and diesel pricing, to a radical redrawing of crude's pivotal forward curve, all of that volatility is expected to intensify in the week ahead. 'Much depends on how Iran responds in the coming hours and days — but this could set us on a path toward $100 oil, if Iran responds as they have previously threatened to,' said Saul Kavonic, an energy analyst at MST Marquee. 'This US attack could see a conflagration of the conflict to include Iran responding by targeting regional American interests that include Gulf oil infrastructure in places such as Iraq, or harassing passage through the Strait of Hormuz.' The maritime chokepoint at the mouth of the Persian Gulf is a vital conduit for not just Iranian shipments, but also for those from Saudi Arabia, Iraq, Kuwait and other members of the Organization of the Petroleum Exporting Countries. Central to everything is the Trump administration's ultimate intention in Iran, having joined Israel's attack. At one stage last week, it appeared more a question of when than if. That then changed late Thursday, when Trump said he'd mull his decision for two weeks. Then in the early hours of Sunday, Iranian time, he announced that Fordow, Natanz, and Isfahan were struck, and described a 'payload of BOMBS' dropped on Fordow, a key location of uranium enrichment. Hours later, in a televised address to the nation, the US president said the strikes had 'totally obliterated' the trio of targets, while also threatening further military action if Tehran did not make peace with Israel. 'The market wants certainty, and this now firmly pushes the US into the Middle East theater,' said Joe DeLaura, a former trader and global energy strategist at Rabobank, adding prices were now expected to rise when oil reopens. 'But I think that this means the US Navy will be tasked to keep the Strait open,' he said, adding prices could head into the $80-to-$90 a barrel range. Still, so far there has been little sign of disruption to oil flows from the region. 'Should the US provide direct military support to Israel and play its part in removing the current regime the initial market reaction will be a price spike,' said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd, said at the end of last week. But his firm's expectation is that oil will not become part of the conflict because it's not in the interests of either side. The fate of oil matters because it drives fuel prices and inflation — something Trump said he would quell when he was campaigning for office. In times of extreme volatility, shortages of oil have even precipitated recessions. So far, there's been no meaningful curtailment through the Strait of Hormuz, through which about a fifth of the world's produced and consumed oil flows every day. Indeed, Iran even appears to be racing to lift its exports as part of its logistical response to the conflict. Avoiding a wider conflagration and preventing disruptions to supply would push oil prices lower, while also bringing down everything that spiked in tandem with them. Against that, America joining could be all-defining, calling into question security through the waterway and from the region at large. On Friday, Iran said it might consider adjustments to its enrichment program, driving down futures and reminding the world that Tehran's actions are important to petroleum markets too. Among assets roiled by the tension are options contracts, where traders paid enormous premiums to hedge against further price spikes. At times since the conflict began, they paid the most to protect against a rally since at least 2013. Record volumes of bullish call options have changed hands since the attacks started. Exiting Trades The market, though, was on edge even before Trump's announcement. Traders have been exiting futures positions at one of the fastest rates on record — an indication of both the stress that higher levels of volatility is placing on derivatives books, and the unpredictable path ahead. In total, the number of futures contracts held on the main exchanges plunged by the equivalent of 367 million barrels, or about 7%, since the close on June. 12, the eve of Israel's attack. Traders and brokers say the higher levels of volatility have made pricing deals harder over the past week. 'Traders and analysts should be viewing the current oil price gyrations in the context of speculative de-risking,' said Ryan Fitzmaurice, senior commodities strategist at Marex Group Plc. 'Going forward, market volatility and open interest will be key areas to watch.' The cost of hiring a ship to carry crude from the Middle East to China has jumped close to 90% since before Israeli attacks began. Earnings for vessels carrying fuels like gasoline and jet fuel have also leaped, as have insurance premiums. The danger to vessels in the region's waters was underscored when two oil tankers crashed into each other causing a fiery explosion — though on this occasion, the ship's owner asserted there was no link to the conflict. Still, almost 1,000 ships a day are having their GPS signals jammed, creating growing safety risks. The MICA Center, a French liaison between the military and commercial shipping, said the tanker crash was likely 'aggravated' by jamming. 'Next days will be critical in determining whether a diplomatic solution with Iran is possible and if the US might resort to military action,' it said in an update. 'Maritime trade is not being targeted. The situation might change abruptly.' The risk to flows from the region, coupled with the sharp increase in shipping costs, is bolstering demand for crudes from outside of the Persian Gulf. Pullback Risk The higher different prices race, the greater the risk of a pullback if the prospect of de-escalation takes shape. And even if tensions do remain high, there's precedent from a few years ago for a meaningful supply disruption to quickly get resolved. When an attack in 2019 on processing facilities at Abqaiq in Saudi Arabia knocked out 7% of global supply, it took just a few weeks for crude futures to trade lower than before the attacks occurred, as supplies were quickly restored and backfilled. That's one reason, coupled with a persistent threat of geopolitical risks that often don't morph into real supply curbs, why traders say prices haven't spiked more in recent days. 'This is the big one,' said John Kilduff, a partner at Again Capital, pointing to a $8-a-barrel risk premium as plausible. 'The market default on this development is higher. How high depends on Iran's response — or the realistic prospects of a meaningful response, which may not be there.' --With assistance from Stephen Stapczynski, Julia Fanzeres and Mia Gindis. (Adds comment from Trump's address in eighth paragraph) Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P.

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