Crude oil slumped and US equity-index futures surged after President Donald Trump agreed to suspend bombing on Iran for two weeks, giving markets a respite following turbulence driven by the six-week Middle East conflict.
West Texas Intermediate tumbled as much as 17% to under $100 a barrel after Trump agreed to the ceasefire, just hours before his Tuesday 8 p.m. New York time deadline that was set for Iran to strike a peace deal. Iran accepted the two-week proposal that was put forward by Pakistan, according to the New York Times.
Equity-index futures for Wall Street gauges jumped more than 2% after Trump’s comments, and the dollar weakened against all its Group-of-10 peers. Treasury futures jumped and gold rose more than 2%.
“I agree to suspend the bombing and attack of Iran for a period of two weeks,” Trump said in a post on Truth Social. The decision to hold off on attacking Iran is “subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.”
Safe passage through the Strait of Hormuz will be possible via coordination with Iran’s armed forces and with “due consideration of technical limitations,” Iranian Foreign Minister Abbas Araghchi said in a post on X.
The ceasefire proposal is helping revive risk sentiment after turmoil that pushed stocks lower and drove investors into the dollar, which emerged as the haven of choice during the conflict. Markets have swung since the war began on concern that a severe disruption to oil flows through the Strait of Hormuz would boost energy prices, stoke inflation and weigh on economic growth.
“As noted on numerous occasions, participants have been desperate for anything resembling good news for some weeks now, and even more desperate to see concrete steps being taken towards de-escalation,” Michael Brown, a strategist at Pepperstone, wrote in a note to clients.
What Bloomberg Strategists Say…
The initial moves in stocks, oil, bonds and the dollar show that investors are keen to buy into the view that a worst-case scenario is going to be avoided in the Iran war. However, there is a long way to go before a convincing exit plan is revealed, which allows for a rebuilding process in the Middle East. Even then, it is likely to leave crude prices with an embedded war premium for months to come.
— Mark Cranfield, MLIV. For full analysis, click here.
The emerging deal marked a major breakthrough and came less than two hours before the expiration of Trump’s deadline for Iran to reopen the strait or face a wave of strikes against power plants, bridges and other targets.
The terms of a possible pact also weren’t disclosed. Trump only said the US had received a 10-point proposal from Iran, describing it as “a workable basis on which to negotiate.”
“Crucially, there is no plan on how the war will end,” said Carol Kong, a strategist at Commonwealth Bank of Australia. “We still expect the US will have to escalate eventually to end the war. So while the dollar may ease further in the immediate term, it will struggle to hold onto losses sustainably.”
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