U.S. President Donald Trump said on Tuesday that he had agreed to a two-week ceasefire with Iran, less than two hours before his deadline for Tehran to reopen the Strait of Hormuz or face widespread attacks on its civilian infrastructure.
Oil dived, bonds rallied and stocks surged as the ceasefire was seen as paving the way for a lasting peace and resumption of Gulf oil and gas exports.
Below are some reactions from investors and analysts:
JAMIE COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, RICHMOND, VIRGINIA:
“Markets have been predicting that Trump was looking for an off-ramp in Iran. Today, he got one and took it.
“Markets have been inching higher over the last week due to an increase in tough talk, which usually precedes the inevitable twist to reach a deal.”
BESA DEDA, CHIEF ECONOMIST, WILLIAM BUCK, SYDNEY:
“Some cautious optimism in markets is likely, as this is the first meaningful ceasefire since hostilities began. However, investors will remain aware that it may not hold. The hope is that it does, limiting the risk of a deeper economic impact.
“Even if the ceasefire ultimately leads to a resolution, damage to refineries and infrastructure will take time to repair and normalise. But it’s far better than a prolonged impact.”
ANDREW LILLEY, CHIEF RATES STRATEGIST, BARRENJOEY, SYDNEY:
“We still have a long way to get back to where we were before this began. The worry now is the markets are unsure of the extent to which the oil price is going to get back to $75.
“This little precipice where actually oil is flowing, no one has a shortage, but it stays at an equilibrium price of $90, that is actually where you remove the tail risk that central banks are cutting.
“It’s kind of the scenario that results in permanently high yields because we’re going to have damaged infrastructure and a sticky high oil price for months to come, which means that we are going to get higher inflation.”
GEORGE BOUBOURAS, HEAD OF RESEARCH, K2 ASSET MANAGEMENT, MELBOURNE:
“Restocking energy supplies is the key over the next week as the conflict can reignite very quickly. This decreases the probability of a recession particularly if more oil, gas, fertiliser can flow in the next week or so. Markets are always pragmatic and not complacent as they are looking through the conflict and valuations remain compelling on a one-year view.”
MARTIN WHETTON, HEAD OF FINANCIAL MARKETS STRATEGY, WESTPAC, SYDNEY:
“This is what happens all the time. Does it mean people are going to take new risks? No, it doesn’t.
“It would have to actually be a lasting peace (to change things). People aren’t actually taking risk. This is algos doing stuff.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“President Trump said he agreed to a two-week ceasefire. That’s enough to keep hopes alive that not only will an entire civilization NOT be destroyed, but we could see oil start flowing through the Strait of Hormuz.
“Is it just kicking the can down the road, moving the goal posts, TACO Tuesday, or whatever metaphor we’d like, to only to have tempers flare and bombs drop again? Who knows? But it’s good enough for now to elicit a positive response from the markets.”
(Reporting by Tom Westbrook and Ankur Banerjee in Singapore; Editing by Sumeet Chatterjee)