Oil prices drop as Israel agrees to ceasefire proposal
TOKYO: Oil prices fell more than 5% on Tuesday after Israel said it had agreed to US President Donald Trump’s proposal for a bilateral ceasefire with Iran.
Shares in Asia rose as fears of an energy-market shock eased following 12 days of war between Israel and its arch-foe. London, Paris and Frankfurt also opened higher.
At around 06:50 GMT on Tuesday, Brent was down 5.2% at $67.75 a barrel, while the main US crude contract, WTI, was 5.4% lower at $65.01 a barrel.
“A potential end to the conflict has been welcomed by market participants,” wrote Lee Hardman at MUFG, noting that Brent “has now almost fully reversed all of the gains since the conflict began.”
“In the foreign exchange market a similar reversal was underway, with the US dollar giving back recent gains. If Middle East risks had faded into the background as a market driver, it was more likely that the US dollar-weakening trend would resume.”
Crude prices had briefly spiked on Monday morning on the prospect that Iran could retaliate to a weekend US attack on its nuclear facilities by throttling oil transport through the strategic Strait of Hormuz. They then tumbled by as much as 7% when Iran said it had launched missiles at a major US base in Qatar, with oilfield assets unaffected.
War Premium
“Tehran played it cool. Their ‘retaliation’ hit a US base in Qatar—loud enough for headlines, quiet enough not to shake the oil market’s foundations,” said Stephen Innes at SPI Asset Management. “And once that became clear, the war premium came crashing out of crude.”
The Israeli government said in a statement on Tuesday that the country had “achieved all the objectives” in its war with Iran, adding that it had removed “an immediate dual existential threat: nuclear and ballistic”. “Israel will respond forcefully to any violation of the ceasefire,” the statement added.
Tokyo ended the day 1.1% higher and Shanghai closed up 1.2%. Hong Kong was trading up 2.1% on Tuesday afternoon.
Seoul surged 3.0%, Taipei gained 2.1% and Jakarta put on 1.3%, while Sydney closed up 1.0%.
The airline Virgin Australia climbed sharply as it re-entered the local share market, a dramatic comeback from near-bankruptcy more than four years earlier.
London gained 0.7% in early trade—with gains limited as shares in oil majors Shell and BP fell owing to the oil-price drop—while Paris was up 1.5% and Frankfurt jumped 1.8%.
In foreign-exchange markets, the dollar gave up gains after Federal Reserve Governor Michelle Bowman said she would support cutting interest rates at the Federal Open Market Committee’s July meeting if inflation held steady.
The market was expecting the Fed to resume cutting interest rates in September.
Bowman indicated that “ongoing progress in tariff negotiations provided a less risky economic environment to adjust policy”, prompting the dollar to weaken, said Wan.
By RSS/AFP
