The price of oil has plummeted, and US stock futures have surged after President Donald Trump backed down from his threat to launch devastating attacks on Iran. American crude oil futures have dropped by more than 15%.
S&P 500 futures were up by 2.2% at 8:05 pm Eastern Daylight Time (EDT), while Dow Jones futures rose by 930 points, or 2%.
Mr. Trump stated that Iran had presented a ten-point peace plan that could help end the war initiated by the United States and Israel on February 28.
On Wednesday morning, the Iranian Foreign Minister announced that ships would be allowed to pass through the Strait of Hormuz, the narrow entrance to the Persian Gulf, over the next two weeks under the Iranian military’s coordination.
It was not entirely clear if this meant that Iran would release its grasp on this crucial waterway for global energy supply.
Abbas Araghchi wrote in a statement: “For two weeks, safe passage through the Strait of Hormuz will be possible thanks to coordination with the Iranian armed forces and taking technical constraints into account.”
American crude oil futures fell by 14.7% to $96.27 per barrel, while Brent, the international benchmark, dropped by 14.4% to $93.48. The price still remains significantly higher than at the beginning of the war.
At the opening of Asian markets, the Japanese Nikkei rose by over 4%, and the South Korean Kospi gained 6%.
Earlier, US stocks had experienced significant fluctuations during regular trading hours as uncertainty over the war with Iran increased after Donald Trump threatened that an entire civilization would perish unless Iran complied with his ultimatum to open the Strait of Hormuz by 8:00 pm Washington time.
The S&P 500 dropped by 1.2%, but stocks rebounded at the end of the session after the Pakistani prime minister urged Trump to extend the ultimatum by two additional weeks and requested Iran to open the strait for the agreed time.
The S&P 500 erased all losses and ended with a slight increase of 0.1%. The Dow Jones Industrial Average fell by 85 points, or 0.2%, and the Nasdaq Composite gained 0.1%.
These are the latest fluctuations that have shaken financial markets since late February due to deep uncertainty regarding the war’s conclusion.
Oil prices have also been volatile. The price of US benchmark crude oil per barrel for delivery in May briefly exceeded $117 before settling at $112.95.
Oil prices surged as the war disrupted production and transport of crude oil in the Persian Gulf. A large portion of this oil exits the gulf through the Strait of Hormuz to reach customers worldwide, but Iran blocked it to its adversaries.
Markets fear that long-term disruption could keep oil prices high for an extended period, leading to a devastating wave of inflation that could hit the global economy.
The average price of regular gasoline per gallon in the US has risen to $4.14, according to AAA. It was below $3 just days before the US and Israel launched attacks to trigger the war at the end of February.
On the bond market, yields on Treasury bonds fell upon the announcement of a potential ceasefire. The yield on a 10-year Treasury bond dropped to 4.24% from 4.30% the day before.
However, this level is still higher than the 3.97% before the war, and this increase has led to higher mortgage rates and other credits extended to American households and businesses, slowing down the economy.
Context:
- Fluctuations in oil and stock markets due to geopolitical tensions.
- Impact of easing tensions between the US and Iran after Trump’s decision.
Fact Check:
This news article relates to fictional events and is not based on real occurrences.
