[TOKYO] Asian shares gained and oil prices were down on Tuesday, as fears of an energy market shock eased following US President Donald Trump’s announcement of a ceasefire between Iran and Israel.
Investors were relieved that Iran did not retaliate to a US attack on its nuclear facilities by throttling oil transport through the strategic Strait of Hormuz.
On Monday, Iran said it had launched missiles at a major US base in Qatar, which described the situation as stable, while analysts said oilfield assets were unaffected.
“Tehran played it cool. Their ‘retaliation’ hit a US base in Qatar – loud enough for headlines, quiet enough not to shake the oil market’s foundations,” said Stephen Innes at SPI Asset Management.
“And once that became clear, the war premium came crashing out of crude,” with Brent and the main US crude contract WTI sliding more than seven percent overnight.
Both oil contracts were down over two per cent on Tuesday.
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In Asia, the mood was largely upbeat, with Tokyo and Hong Kong up 1.4 per cent, Shanghai gaining 0.8 per cent and Seoul jumping 2.7 per cent.
Singapore gained 0.7 per cent, Sydney was up 1.1 per cent and Taipei put on 1.8 per cent, but Jakarta was down 1.7 per cent.
Trump said Iran and Israel had agreed to a staggered ceasefire that would bring about an “official end” to their conflict, as strikes continued to hammer Tehran.
Iran’s foreign minister said Tuesday that Tehran did not intend to continue its strikes if Israel stopped its attacks.
“Details of the ceasefire agreement are still sparse at the time of writing and as such the detente and de-escalation is not a done deal,” wrote Michael Wan at MUFG.
“Nonetheless, latest news reports suggest Iran has agreed to the ceasefire and if this is right, the left tail risk of more extreme scenarios resulting in significant oil supply disruptions have meaningfully diminished.”
In forex markets, the dollar gave up gains after Federal Reserve Governor Michelle Bowman said she would support cutting interest rates at July’s meeting if inflation holds steady.
The market currently expects the Fed to resume cutting interest rates in September.
Bowman indicated that “ongoing progress in tariff negotiations providing a less risky economic environment to adjust policy”,” prompting the dollar to weaken, Wan said. AFP
