Oil prices experienced a significant decline after US President Donald Trump announced he had called off a planned military attack on Iran and hinted at a new nuclear agreement that could lead to the reopening of the Strait of Hormuz. West Texas Intermediate (WTI) crude was down nearly 5%, trading at $80.52 a barrel, while Brent crude fell over 4.6% to $83.85. This sharp reversal followed weeks of oil rallies, during which Brent and WTI had gained over 20% due to escalating tensions and shipping disruptions in the Gulf.
The market reaction was largely driven by optimism surrounding a potential deal that would reopen the Strait of Hormuz and end regional attacks by Iranian-backed militias. Trump indicated that Iran and other Middle Eastern countries requested a pause, leading to an agreement on the broad "perimeters" of a deal. Such an agreement would involve Washington ending its naval blockade and allowing Tehran to export oil. Analysts, like Nick Twidale of AT Global Markets, noted that concrete progress on a peace deal or the reopening of the Strait of Hormuz could trigger strong relief rallies across various markets.
Beyond oil, the market saw broader movements. Treasuries rose, with the benchmark 10-year yield dropping four basis points to 4.69%, easing inflation concerns. Gold climbed 0.5% to about $4,070 an ounce. Futures for the Nasdaq 100 Index and European shares advanced 0.9%, while Asian stocks, particularly South Korean chipmakers like Samsung Electronics and SK Hynix, tumbled over 8%. The Japanese yen also strengthened by as much as 1.4% against the dollar, potentially signaling further market intervention after coordinated action between Japan and the US last week. The overall sentiment shifted, with some analysts suggesting a return of focus to the artificial intelligence theme for equities.
