Oil prices rose on Wednesday, while Asian markets largely fell, after US President Donald Trump extended his country’s ceasefire with Iran.
Investors are in a delicate wait-and-see phase on whether the conflict will resume. Trump has said the US blockade of Iran’s ports will continue, but Iran has seized two vessels for maritime violations, which has escalated tension in the Strait of Hormuz.
Analysts say the two countries remain divided on the ceasefire, the US blockade, as well as nuclear issues and control of the strait. Meanwhile, the Revolutionary Guards showcased ballistic missiles in a parade in Tehran.
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With the Strait of Hormuz still blocked to Gulf energy transit, traders remain wary that strikes could resume – even though Wall Street indexes are at record highs after recovering losses since the Middle East war erupted in late February.
But analysts say expectations are high that both Trump and Iranian authorities want to end a war that has sent oil and gas prices soaring, threatening economic growth worldwide.
Solid corporate earnings and AI enthusiasm have also bolstered investor confidence, with dozens of blue-chip firms beating forecasts and billion-dollar tech deals spurring optimism among investors that recent equity gains will hold.
Trump said late on Tuesday that he had pushed back the end of a two-week truce with Tehran following a request by Pakistani mediators and to give Iran’s “fractured” leadership time to formulate a proposal.
A second round of US-Iran talks could take place within the next three days, the New York Post reported on Wednesday, citing unnamed Pakistani sources and President Donald Trump.
“It’s possible!” Trump reportedly told the Post by text message, when asked about sources in Pakistan – which mediated the first round of talks, saying that a second round was “expected in Islamabad within the next 36 to 72 hours.”
Asian markets mixed
Markets in Asia were mixed on Wednesday, with the Nikkei in Tokyo up 0.4%, along with the Shanghai Composite, which rose by 0.5%.
But the Hang Seng in Hong Kong fell 1.2%, while the ASX in Sydney dropped 1.1% and the BSE Sensex in Mumbai was down by 0.95%. Most other markets in the region declined.
Later, Wall Street stocks opened higher, while most European markets were down slightly after the mixed mood among investors across Asia.
“Most seem convinced that the war will soon be over, or that it will have little effect on the US economy, even if energy prices remain relatively elevated,” David Morrison, senior market analyst at Trade Nation, told AFP.
Elon Musk’s SpaceX said on Tuesday that it would partner with the AI coding start-up Cursor with an option to buy the company for $60 billion, the latest sign of corporate confidence that artificial intelligence will continue driving growth.
Soaring inflation
But with Hormuz oil shipments still shut, the Asian and European countries that rely most on Middle East energy supplies are scrambling to cope with soaring inflation that could derail growth.
“The ceasefire extension hasn’t done much to calm nerves, given that worries remain about the impact of the energy squeeze on the global economy,” Susannah Streeter, chief investment strategist at Wealth Club, said.
Brent North Sea crude was once more above $100 a barrel, while the main US benchmark, West Texas Intermediate, traded back above $90.
Iranian gunboats seized two container vessels seeking to cross the blockaded Strait of Hormuz on Wednesday, maritime agencies said, despite US President Donald Trump announcing he was extending a ceasefire to allow more time for peace talks.
“The US and Iran may be trying to shore up leverage and playing a game of who blinks first,” Christopher Wong, a strategist at Oversea-Chinese Banking Corp, said.
“Whatever the outcome, the suspense in the interim may see risk appetite being curtailed,” he said.
Away from the war, investors are keeping tabs on the Senate confirmation hearings of Kevin Warsh, Trump’s pick to replace Federal Reserve boss Jerome Powell, whose term ends in May.
Trump has assailed Powell for not cutting interest rates more aggressively, and told CNBC on Tuesday that he would be disappointed if Warsh did not swiftly lower borrowing costs despite rising inflation.
Warsh told lawmakers he would not be controlled by the president, as he fielded questions on his assets and central bank independence during his first hearing.
In Europe, official data showed that Britain’s annual inflation jumped to 3.3% in March as the Middle East war sent oil and gas prices surging.
Both Germany and Italy cut their GDP growth forecasts for this year and next.
US stocks rose shortly after trading began, with markets reportedly delighted that the ceasefire was continuing.
Key figures at 1340 GMT
Brent North Sea Crude: UP 1.6% at $100.02 a barrel.
West Texas Intermediate: UP 1.6% at $91.27 a barrel.
Tokyo – Nikkei 225: UP 0.4% at 59,585.86 (close).
Hong Kong – Hang Seng Index: DOWN 1.2% at 26,163.24 (close).
Shanghai – Composite: UP 0.5% at 4,106.26 (close).
New York – Dow Jones: UP 0.6% at 49,149.38 points
New York – S&P 500: UP 0.7% at 7,111.23.
New York – Nasdaq: UP 0.7% at 24,435.87.
London – FTSE 100: DOWN 0.1% at 10,486.87.
Dollar/yen: DOWN at 159.18 yen from 159.25.
- Jim Pollard with AFP