Oil prices dropped by 3.5 per cent on Tuesday after Israel agreed to a U.S.-brokered ceasefire proposal with Iran, easing fears of an energy market shock.
Brent crude was down $2.49 at $69.00 per barrel, while West Texas Intermediate (WTI) fell $2.39 to $66.10 per barrel.
Asian shares were buoyant, with Tokyo’s Nikkei 225 up 1.1 per cent, Hong Kong’s Hang Seng Index up 2.06 per cent, and Shanghai’s Composite up 1.15 per cent.
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The U.S. dollar gave up gains after Federal Reserve Governor Michelle Bowman hinted at potential interest rate cuts in July if inflation holds steady.
The Israeli government said in a statement on Tuesday that it had “achieved all the objectives” in its war with Iran and would respond forcefully to any ceasefire violation.
“Israel will respond forcefully to any violation of the ceasefire,” the statement said.
Tokyo ended the day 1.1 per cent higher and Shanghai closed up 1.2 percent. Hong Kong closed up 2.06 per cent on Tuesday afternoon.
The airline Virgin Australia climbed sharply as it re-entered the local share market, a dramatic comeback from near bankruptcy more than four years ago.
London gained 0.7 per cent in early trade with gains limited as shares in oil majors Shell and BP fell owing to the oil price drop while Paris was up 1.5 per cent and Frankfurt jumped 1.8 per cent
In forex markets, the dollar gave up gains after Federal Reserve Governor Michelle Bowman said she would support cutting interest rates at July’s meeting if inflation holds steady.
The market currently expects the Fed to resume cutting interest rates in September.
Bowman indicated that “ongoing progress in tariff negotiations providing a less risky economic environment to adjust policy”,” prompting the dollar to weaken, Wan said.
The potential end to the conflict was welcomed by market participants, who had priced in a “war premium” into crude oil prices.
