Donald Trump must appreciate the – sad – power of his words. On Tuesday, the US president stated that the United States would leave Iran “very soon”, in “two or three weeks”, regardless of whether an agreement was reached or not. In summary, the Strait of Hormuz blocked by the Islamic Republic is no longer his problem, according to him.
The billionaire, at the head of the world’s first military and economic power, is used to blowing hot and cold in very short cycles, and his decisions and statements affect financial markets, which fluctuate according to his announcements. Fortunately for the stock exchanges, his latest words seem to give them a little breathing room.
Asian stock markets surge
Wednesday morning, the East Asian stock markets were the first to react, due to time zones. At 4:50 am Paris time, the Tokyo flagship index, the Nikkei, climbed by 4.04% to 53,128 points, while in Seoul, the Kospi surged by 6.62% to nearly 5,387 points.
Similarly in China, where the Shanghai Composite Index rose by 1.42% and the Shenzhen Index gained 1.24%. In Hong Kong, the Hang Seng index rose by 1.81%, and the Taiex in Taipei also showed an increase of 4.17%.
“Given that information suggesting a ceasefire has been communicated by both the United States and Iran, the Japanese market should progress,” anticipated the specialized company Tokai Tokyo Securities before the session opened.
“The market wants to believe that Donald Trump is determined to end the war”
This morning’s good health of the Korean stock exchanges is explained in particular by the pressure exerted by the conflict in the Middle East on oil prices and, more broadly, on energy.
Equally attentive, European stock exchanges also welcomed Donald Trump’s latest U-turn. In Frankfurt, the Dax rose by 2.64% by 09:30. In Paris, the CAC40 was also on the rise (+2.26%) as was Milan (+2.77%). More sensitive to oil majors, London progressed more calmly (+1.72%), against a slight fall in the price of a barrel.
“The market wants to believe that Donald Trump is determined to end the war in Iran within two to three weeks as he indicated,” according to Natixis analysts.
Statements from the Iranian president reassure
Above all, Iranian President Massoud Pezeshkian demanded “the necessary guarantees to prevent the repetition of the aggression.” “This is the first concrete statement from Iran that seems reliable,” says Art Hogan of B. Riley Wealth Management.
“The key remains the sustainable opening of the Strait of Hormuz, as well as the vulnerability of the region’s energy infrastructure, including beyond oil and gas,” add Natixis analysts.
The wave of optimism then reached the markets across the Atlantic, where the New York Stock Exchange had already ended sharply higher on Tuesday: the Dow Jones gained 2.49%, the Nasdaq soared by 3.83%, and the S&P 500 index rose by 2.91%.
Oil and government debt also react
Far from being limited to the stock markets, Donald Trump’s remarks calmed the oil markets. The global benchmark Brent crude oil dropped below $100 a barrel for the first time in several weeks ($99.14, down 4.65%) on the first day of new June delivery contracts. Its American counterpart WTI also fell to $97.25 a barrel (-4.07%).
“Crude oil prices remain high and uncertainty remains about a possible escalation in the Middle East,” tempers Andreas Lipkow at CMC Markets.
“Disruptions in the energy sector are expected to continue for several months and are likely to weigh on both inflation and economic growth,” notes Emma Wall, chief investment strategist for Hargreaves Lansdown.
The relaxation was also felt in the government debt markets, weighed down by inflation risks that concern investors.
The ten-year bond yield of Germany fell below 3% for the first time in several days (2.94%). Its French equivalent had a 3.62% return on ten-year bonds, compared to 3.72% the day before.
Find all the news on the Middle East conflict here.
