Oil prices fell below $100 per barrel while the S&P 500 and global markets surged after the U.S. and Iran agreed to a two-week ceasefire deal that includes the reopening of the Strait of Hormuz for the first time in more than a month. Brent crude for June delivery plunged 16.4% to trade at $91.37 per barrel at 8.00 am ET, while WTI crude for May delivery declined 17.9% to change hands at $92.62/bbl.
On Wednesday morning, Agence France-Presse (AFP) reported that two ships appeared to have transited the Strait of Hormuz since the U.S.-Iran ceasefire deal late on Tuesday. A Greek-owned bulk carrier and a Liberia-flagged vessel both transited the Strait early on Wednesday, according to AFP reporting citing MarineTraffic.
Not surprisingly, Big Oil stocks tumbled alongside falling oil prices, with Exxon Mobil (NYSE:XOM) down 6.1%; Chevron (NYSE:CVX) lost 5.3%, Marathon Petroleum (NYSE:MRO) was down 5.8%, British Petroleum (BYSE:BP) declined 5.6%, TotalEnergies (NYSE:TTE) slipped 3.9%, while Shell Plc (NYSE:SHEL) lost 4.3% in the pre-market session.
In sharp contrast, major carriers recorded double-digit gains due to falling fuel costs, with Delta Airlines (NYSE:DEL) up 12.9%; Southwest Airlines (NYSE:LUV) jumped 13.3% and United Airlines (NYSE:UAL) gained 12.7% in pre-market trading.
S&P 500 futures rose 2.7%, Nasdaq futures were up 3.4% while the Dow Jones Industrial Average gained 2.6% in pre-market trading, reversing losses from the previous five weeks of conflict after major disruptions of critical oil shipping routes. The U.S. Dollar weakened as its “safe haven” appeal lessened, with the Euro rising to $1.1701.
Meanwhile, global benchmarks posted even bigger gains, with Japan’s Nikkei 225 advancing 5.4% to reach 56,308.42; South Korea’s Kospi soared 6.9%, Germany’s DAX climbed nearly 5%, while France’s CAC 40 added 4.5%.
However, analysts cautioned that the ceasefire is a temporary two-week reprieve rather than a permanent resolution, and the global energy system remains fragile due to structural damage to regional infrastructure. “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.”
By Alex Kimani for Oilprice.com
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