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Oil futures sank below $100 a barrel while equity and bond prices rallied sharply on Wednesday after the United States and Iran agreed on a two-week ceasefire, prompting hopes for a resumption of oil and gas flows through the Strait of Hormuz.
US President Donald Trump announced the ceasefire, which was brokered by Pakistan, less than two hours before his deadline for Iran to reopen the Strait, through which about a fifth of global oil and liquefied natural gas is shipped, or face devastating attacks on its civilian infrastructure.
Iran said it would cease counterattacks and provide safe passage through the waterway if attacks against it stop.
Gulf stock markets ended higher on Wednesday after the US and Iran agreed to a fragile two-week ceasefire deal, which includes the immediate and secure reopening of the Strait of Hormuz.
Dubai’s main market surged 6.9% in its biggest intraday gain since March 2020, buoyed by a 13% jump in blue-chip developer Emaar Properties and an 11% jump in top lender Emirates NBD Bank. Among other gainers, budget airline Air Arabia soared 10.8%. Dubai’s main index has been the worst performer among its regional peers recently, dropping more than 16% in March as the conflict continued.
Abu Dhabi’s benchmark index climbed 2.9%, with its largest lender First Abu Dhabi Bank rising 5% and real estate giant Aldar Properties soaring 10.1%. Energy firm Adnoc Gas gained 3.5%, while Abu Dhabi Ports Company advanced 11.1%. Qaqish said he expected the UAE government to keep supporting the economy through aid for banks, small and medium enterprises and new measures to restore confidence. In Qatar, the index rose 3.7% as all its constituents advanced, with the Gulf’s biggest lender, Qatar National Bank, climbing 4.2%.
Petrochemicals maker Industries Qatar rose 5.8%, while Qatar Gas Transport was the top gainer, climbing 8.1%. The prospect of a reopened Strait of Hormuz has removed part of the extreme tail risk markets had been pricing in, prompting a rebound in regional equities, said Ahmad Assiri Research Strategist at Pepperstone.
But this looks more like tactical repositioning than fresh inflows, he said, adding that while sentiment has improved, conviction remains limited and the durability of the rally will depend less on valuations and more on whether the conflict continues to de-escalate. Saudi Arabia’s benchmark index ended 2.3% higher, led by a 2.8% rise in Al Rajhi Bank.
Budget airline flynas closed 8.9% higher. Unlike its regional peers, the Saudi stock market was the least affected during the war. The rise in global oil prices generated substantial financial gains for Iran, Oman and Saudi Arabia, while costing states without alternative export routes billions of dollars, a Reuters analysis found. Saudi energy stocks, meanwhile, gave back part of their recent gains, with oil major Saudi Aramco falling 2.8% on Wednesday after rising more than 10% since the conflict began. The Saudi energy index dropped 1.9%.
Yanbu National Petrochemical Co after surging more than 41% last month. Boursa Kuwait added 1.7%, while Bahrain’s index rose 0.6%. Outside the Gulf, Egypt’s blue-chip index climbed 4.1%, with most of its constituents in positive territory, including Commercial International Bank . Saudi rose Arabi 2.3% to a 11,339 Abu Dhabi advanced 2.9% to 9,869 Dubai jumped 6.9% to 5,777 Qatar gained 3.7% to 10,662 Egypt added 4.1% to 48,594 Bahra was in up 0.6% to 1,888 Oman finished flat at 8,233 Kuwai t gained 1.7% to 9,256.
Shipping sources told Reuters the Iranian navy threatened with destruction ships attempting to pass through the Strait of Hormuz without Tehran’s permission. Transit through the waterway remained shut, several sources said.
Still, investors, who had moved to the sidelines on Tuesday ahead of Trump’s deadline, pushed Wall Street equities to nearly one-month highs on Wednesday while the US dollar slipped.
Treasury yields tumbled as investors bet that sliding oil prices could keep inflation in check and increase the probability of Federal Reserve rate cuts.
“Today’s market rally is a classic geopolitical relief trade because oil is collapsing and some of the tail risks are coming off the table for now,” said Gene Goldman, chief investment officer at Cetera Investment Management.
“The market is quickly repricing away from a global energy shock. Today’s move is being amplified. There’s a lot of short covering taking place, a lot of systematic buying, turning what should be a modest equity bounce into a strong rally.” He noted, however, that “there’s still uncertainty about the ceasefire, which is only two weeks, and there’s contradictions around what the Trump administration has said and what the Iranians have said about the Strait of Hormuz.” In US equities, at 10:56 a.m. ET (1456 GMT) the Dow Jones Industrial Average rose 1,017.69 points, or 2.19%, to 47,605.54, the S&P 500 rose 126.99 points, or 1.92%, to 6,744.40 and the Nasdaq Composite rose 499.60 points, or 2.29%, to 22,522.33.
MSCI’s gauge of stocks across the globe rose 28.73 points, or 2.88%, to 1,026.82 and the pan-European STOXX 600 index rose 3.61%.
Agencies
