Wall Street, global markets surge after US-Iran ceasefire sends oil prices below $100 per barrel
A street sign for Wall Street is seen outside of the New York Stock Exchange in New York City, Wednesday. Reuters-Yonhap
Wall Street surged in Wednesday premarket trading as oil prices plunged below $100 after the U.S. and Iran agreed to a two-week ceasefire that includes the reopening of the Strait of Hormuz.
Futures for the S&P 500 jumped 2.7 percent before the opening bell and futures for the Dow Jones Industrial Average climbed 2.6 percent. Nasdaq futures soared 3.4 percent.
Benchmark U.S. crude sank $18.43 to $94.52 a barrel, a nearly 16-percent decline. Brent crude, the international standard dropped $15.54 to $93.73 a barrel. Natural gas futures declined close to 5 percent.
The drops reversed some of the rise in oil prices since the start of the war more than five weeks ago that had effectively blocked passage through the strait that’s a crucial route for global supplies.
For now, market analysts see the ceasefire as more of a reprieve than a resolution.
“Yet the mood remains one of cautious optimism rather than outright celebration," said Tim Waterer, chief market analyst at KCM Trade. "The ceasefire is only two weeks long, and markets will be watching closely to see whether shipping through the Strait of Hormuz normalizes as promised and whether the fragile truce can pave the way for a more durable peace agreement."
Late Tuesday, Trump said he was holding off on his threatened attacks on Iranian bridges, power plants and other civilian targets. Iran’s foreign minister said passage through the strait would be allowed for the next two weeks under Iranian military management.
But analysts warned against too much optimism.
“There is a reason to be optimistic, but it is still too early to tell, because, as you know, after all, it is Trump,” said Takashi Hiroki, chief strategist at MONEX.
U.S. Treasury yields fell as the drop in oil prices could alleviate some of the concerns in the bond market about a hefty spike in inflation. The yield on the 10-year Treasury fell to 4.24 percent from 4.30 percent on Tuesday.
In equities trading, major U.S. airline stocks soared on the steep drop in oil prices. Delta and United jumped more than 12 percent in premarket while American rose 10 percent. Delta on Wednesday also reported first-quarter sales and profit that came in ahead of Wall Street forecasts and said that demand remained strong with the summer travel season just a few months away.
Companies in the energy sector fell along with the drop in oil prices. Exxon Mobil and ConocoPhillips each lost close to 6 percent while Chevron tumbled 4.6 percent.
Elsewhere, in Europe France's CAC 40 added 4.5 percent by midday, while the German DAX soared nearly 5 percent. Britain's FTSE 100 gained 2.9 percent.
In Asia, Japan’s benchmark Nikkei 225 gained 5.4 percent to finish at 56,308.42. Australia’s S&P/ASX 200 jumped 2.6 percent to 8,951.80. South Korea’s KOSPI soared 6.9 percent to 5,872.34. Hong Kong’s Hang Seng surged 3.1 percent to 25,893.02, while the Shanghai Composite added 2.7 percent to 3,995.
In currency trading, the U.S. dollar fell to 158.39 Japanese yen from 159.52 yen Wednesday. The euro cost $1.1701, up from $1.1597. The dollar usually becomes a safe haven during geopolitical uncertainty, so the ceasefire deal worked to lessen that appeal.