Global markets surge as Iran says Strait of Hormuz open during ceasefire

[LONDON] The price of oil tumbled and stocks and government bonds rallied on Friday (Apr 17) after Iran’s foreign minister said that the Strait of Hormuz was open for passage while a ceasefire is in force.

Abbas Araqchi said in a post on X that passage for all commercial vessels through the Strait of Hormuz was declared completely open for the remaining period of ceasefire, in line with the ceasefire in Lebanon.

The price of benchmark Brent crude futures tumbled to US$90 a barrel, down 9 per cent on the day, US crude fell 10 per cent to US$81.5 a barrel.

While still above pre-war levels, that is down significantly from late March’s highs, which, for Brent, were close to US$120 a barrel.

Stocks around the world, which had already been trading around record highs, jumped further on the news. Europe’s broad STOXX 600 was last up 1.3 per cent having been close to flat before the announcement, S&P futures were 0.9 per cent higher.

“If we move to a situation where the path is still towards de-escalation – but we now have the bonus of commodity flows through Hormuz getting back to something resembling a normal level that we saw pre-conflict – then that’s obviously removing a pretty chunky tail risk for the economy,” said Michael Brown, senior research strategist at Pepperstone.

“I think that’s why markets are reacting so positively.”

Government bonds also rallied, with the benchmark 10-year Treasury yield dropping 7 basis points to 4.23 per cent, its lowest since mid March.

Unlike stocks, which had already regained their pre-war highs in the United States and many other markets, bonds have yet to do so.

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European bonds have sold off more than US ones since the war began as the impact of higher energy prices had traders rushing in to price rate hikes from the European Central Bank and Bank of England.

On Friday, they were outperforming as those rate cut bets were pared back.

Germany’s 10-year yield fell 8 basis points to 2.96 per cent, while the rate sensitive two-year yield fell 10 bps to 2.42 per cent. Britain’s two-year yield fell 15 bps to 4.10 per cent.

The dollar also slid, falling 0.6 per cent to 158 yen, while the euro was up 0.6 per cent at US$1.1848, a two-month high. REUTERS