Oil prices plunge below US$100, Asia stocks jump after US, Iran agree to two-week ceasefire
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Brent crude, the global oil benchmark, fell as much as 16 per cent.
PHOTO: REUTERS
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SINGAPORE – Oil plunged below US$100 a barrel after the US and Iran agreed to a two-week ceasefire that is expected to halt military strikes in exchange for Tehran reopening the Strait of Hormuz.
Brent crude, the global oil benchmark, fell as much as 16 per cent. It was down 13.7 per cent at US$94.28 a barrel at 3.08pm Singapore time. The US oil benchmark, West Texas Intermediate, was down 15 per cent at US$96.06.
In Asian stock markets, Japan’s Nikkei closed up 5.4 per cent while South Korea’s Kospi ended 6.9 per cent higher and Hong Kong’s Hang Seng Index rose 3.1 per cent.
Singapore’s Straits Times Index gained 0.8 per cent to finish at 4,996.05.
US President Donald Trump said the ceasefire is subject to Iran reopening the Strait of Hormuz and will allow an agreement “to be finalised and consummated”.
Iran accepted Pakistan’s ceasefire proposal and added that safe passage through the strait will be possible via coordination with the nation’s armed forces for two weeks, Foreign Minister Abbas Araghchi said. Israel has also agreed to the ceasefire, according to a White House official.
The current plan includes allowing Iran and Oman to charge fees on ships transiting through the Strait of Hormuz, the Associated Press reported, citing a regional official.
US and Iranian delegates are expected to meet in Islamabad on April 10 to further negotiate a “conclusive agreement to settle all disputes”, Pakistani Prime Minister Shehbaz Sharif said on social media platform X.
“Oil can fall further as key details of a ceasefire deal are provided to the market,” said Mr Vivek Dhar, an analyst at Commonwealth Bank of Australia. “How much Iran pushes its hand will be closely watched and may limit further material falls in oil prices.”
The near-closure of the vital waterway – which normally sees the transit of about a fifth of the world’s oil and liquefied natural gas – has roiled energy markets, with US oil still up more than 40 per cent since the conflict began at the end of February. The curtailment of shipments is expected to leave more than nine million barrels a day of oil output from key Middle Eastern producers shut in during April, according to US government estimates.
“This was a market that had been starved of good news,” said Mr Josh Gilbert, an analyst at eToro. “We’ve seen an instant sell-off in crude, pulling back 16 per cent to under US$100 as markets price in the prospect of the Strait of Hormuz reopening. It goes to show how much geopolitical risk was baked into crude, and how quickly it can unwind when there’s a credible path to de-escalation.”
The de-escalation in the conflict saw volumes surge. Around 240,000 Brent contracts changed hands in the first hour of trading of the global benchmark, while a typical session may see just a few thousand lots traded within that time period.
Mr Trump’s ceasefire announcement came about 90 minutes before his initial deadline for Iran to reopen the strait or face a massive bombardment.
The lead-up was marked by military escalation and increasingly bellicose threats from the US leader aimed at the Islamic republic, including a post saying “a whole civilisation will die tonight”.
Earlier on April 7, US forces struck sites on the Islamic republic’s Kharg Island similar to those that were hit in a round of attacks in March, but did not target energy infrastructure, according to US officials. BLOOMBERG
