Staff writers
Australiaโs sharemarket is expected to slide on opening despite oil prices plunging and stock markets surging worldwide after President Donald Trump announced a two-week ceasefire in the US-Israeli war against Iran.
The early optimism that pushed oil down toward $US95 ($135) per barrel on Wednesday faded as Israel lashed Lebanon with its biggest wave of airstrikes and Iran said it had closed the Strait of Hormuz again.
Futures on Thursday at 5.30am AEST point to the local bourse sliding 0.53 per cent, or 48 points, reversing some gains from Wednesdayโs powerful $US80 billion relief rally.
Overnight in the US, the S&P 500 leapt 2.5 per cent after Trump said a ceasefire had been reached with Iran, less than 90 minutes before a deadline he had set for it to open the Strait of Hormuz and allow oil tankers to exit the Persian Gulf. Oil plunged back toward $US95 per barrel.
The Dow Jones Industrial Average was up 1257 points, or 2.7 per cent, as of 1.54pm US Eastern time, and the Nasdaq composite was 2.9 per cent higher following even bigger gains in European and Asian stock markets.
To be sure, stock prices are still below where they were before the war. And oil prices are still significantly higher because the threat remains that the war could continue and keep oil produced in the Persian Gulf area blocked in the Middle East.
Some of the euphoria that launched dramatic moves in stock and oil prices early Wednesday faded as the day progressed, and financial markets have been prone to sharp and sudden reversals because of deep uncertainty about what will happen next in the war.
โThere is a reason to be optimistic, but it is still too early to tell, because, as you know, after all, it is Trump,โ said Takashi Hiroki, chief strategist at MONEX.
So far in the war, Trump has set several deadlines for Iran to open the Strait of Hormuz, a main thoroughfare for oil to reach customers worldwide from the Persian Gulf, and has threatened big repercussions if Iran doesnโt, only to delay them.
Itโs similar to a year ago, when Trump threatened stiff tariffs on imports from other countries on โLiberation Day.โ After a couple of delays, his administration eventually negotiated lower tariffs with many countries, though they were still higher than those before his second term. That led some investors to allege Trump โalways chickens out,โ or โTACO,โ if financial markets show enough pain.
โIs it just kicking of the can down the road, moving the goalposts, TACO Tuesday, or whatever metaphor weโd like, only to have tempers flare and bombs drop again?โ Brian Jacobsen, chief economic strategist at Annex Wealth Management, asked about the two-week ceasefire with Iran. โWho knows? But itโs good enough for now to elicit a positive response from the markets.โ
The price for a barrel of benchmark US crude oil plunged 15.9 per cent to $US95.01 after almost dropping to $US91 earlier in the morning.
Brent Crude, the international standard, tumbled 13.2 per cent to $US94.92 per barrel. It had briefly topped $US119 when worries about the war with Iran were at their highest, but itโs still above its roughly $US70 price from before the war.
The average price for a gallon of regular gasoline has already topped $US4.16 in the US, according to AAA. Thatโs up from less than $US3 a couple of days before the war began in late February. If oil prices stay high for a long time, it would push up the price of nearly everything thatโs moved by truck, plane or boat.
The next moves for oil prices will likely depend on how many oil tankers can start exiting the Strait of Hormuz and how easy their passage is. Iran said the deal would allow it to formalise its new practice of charging ships passing through the Strait of Hormuz, but the terms were not clear.
In Asia, where countries are more reliant on oil from the Middle East, South Koreaโs Kospi stock index surged 6.9 per cent. Japanโs Nikkei 225 leapt 5.4 per cent, and Hong Kongโs Hang Seng jumped 3.1 per cent.
European stock indexes rose nearly as much. Germanyโs DAX returned 5.1 per cent, and Franceโs CAC 40 rallied 4.5 per cent.
On Wall Street, companies with big fuel bills roared back to trim some of the sharp losses taken on worries about oil prices staying high.
In the bond market, Treasury yields dropped as hopes built that easing oil prices could allow the Federal Reserve to resume its cuts to interest rates later this year.
The yield on the 10-year Treasury fell to 4.28 per cent from 4.33 per cent late Tuesday. Thatโs a notable move for the bond market, and lower Treasury yields give a boost to prices for stocks, bonds and all kinds of other investments. The drop should also ease some of the recent rise in rates for mortgages and other loans taken out by US households and businesses.
When oil prices were screaming higher because of the war, some traders were betting on the possibility that the Fed would have to raise interest rates to keep a lid on inflation. Now, theyโre seeing a roughly 1-in-3 chance that the Fed could resume its cuts to rates in 2026, according to data from CME Group.
With AP
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