LONDON: Global oil prices jumped and most stock markets fell on Thursday after Israeli air strikes on Lebanon in violation of the Pakistan-brokered US-Iran ceasefire and a re-opening of the Strait of Hormuz.
On Wednesday, Pakistan Prime Minister Shehbaz Sharif announced that the United States, its allies, and Iran had agreed to a ceasefire “everywhere”, including Lebanon, following relentless diplomatic efforts by his government to stop weeks of fighting.
Pakistan is set to host high-stakes negotiations between the US and Iran this weekend, as a two-week ceasefire entered its second day on Thursday.
Traders were also locking in profits from Wednesday’s relief rally as the first-quarter earnings season gets underway, which should show the war’s impact on company results worldwide.
Equity markets across the globe had soared and crude oil futures plunged Wednesday after US President Donald Trump announced the two-week halt in the war against Iran, and Tehran said it would reopen the Strait of Hormuz transporting one-fifth of the world’s oil and gas.
But the ceasefire has been placed in doubt, largely by Israel’s ongoing attacks on Lebanon.
The main US oil contract, West Texas Intermediate, rebounded over five percent to reach almost $100 a barrel as international calls mounted for the ceasefire to be extended after a massive wave of Israeli strikes on Lebanon killed more than 200 people.
Anthony Kettle at RBC BlueBay Asset Management cautioned that “Even if the ceasefire holds it will take time for energy exports from the region to return to more normalised levels, so there will be an impact on growth and inflation that is still difficult to ascertain”.
Wall Street stocks opened with losses, after losses on Europe’s main stock markets and across much of Asia.
“While progress towards a more permanent resolution in the Middle East will dominate short-term market moves, it’s earning power that drives stock prices in the long term,” Chiekrie said ahead of the first-quarter earnings season.
Some companies have already begun alerting markets to the impact of the war on their earnings for the January-March period, with the conflict having started on February 28.
Key figures at around 1350 GMT
Brent North Sea Crude: UP 3.5 percent at $98.03 a barrel
West Texas Intermediate: UP 5.3 percent at $99.41 a barrel
New York – Dow Jones: DOWN 0.2 percent at 47,834.24 points
New York – S&P 500: DOWN 0.1 percent at 6,773.46
New York – Nasdaq: DOWN 0.2 percent at 22,590.01
London – FTSE 100: DOWN 0.2 percent at 10,590.51
Paris – CAC 40: DOWN 0.8 percent at 8,198.43
Frankfurt – DAX: DOWN 1.5 percent at 23,713.29
Tokyo – Nikkei 225: DOWN 0.7 percent at 55,895.32 (close)
Hong Kong – Hang Seng Index: DOWN 0.5 percent at 25,752.40 (close)
Shanghai – Composite: DOWN 0.7 percent at 3,966.17 (close)
Euro/dollar: UP at $1.1685 from $1.1667 on Wednesday
Pound/dollar: UP at $1.3417 from $1.3405
Dollar/yen: UP at 159.04 yen from 158.35 yen
Euro/pound: DOWN at 87.10 pence from 87.22 pence
