Market snapshot: Iran ceasefire triggers global wave of relief 

A global wave of relief washed over markets as the announcement of a two-week ceasefire brought hope of a permanent end to the conflict in the Middle East.

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Ironically, US markets will be the last to react, with the news coming outside of opening hours. Futures are pointing sharply higher, with the Dow Jones currently indicating a gain in excess of 1,000 points, alongside spikes of up to 3.5% for the benchmark S&P500 and Nasdaq indices.

The truce came shortly before the US President’s severe warning of devastation came close to the deadline, with the pause in hostilities contingent on a full reopening of the Strait of Hormuz. He also pointed to a 10 point proposal from Iran which was a “workable basis on which to negotiate” and, at the very least, allows some calculations to be made on the effects which the closure has already had.

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Oil prices fell by almost 15% as a result, with Brent currently trading at around $93 per barrel. Even so, the price remains 28% higher since the beginning of the conflict and 53% up since the beginning of the year. Given the backlog of supply and the damage already wrought on some energy infrastructure in the region, however, it may take some time for the price to find its new natural level.

The news is undeniably positive but the finishing line has not yet been crossed. There will continue to be market reaction as updates on the negotiations are released, and the two-week timeframe adds pressure for a fully agreed resolution. 

Meanwhile, a strong opening in US markets later today could repair much of the damage which has been suffered in the year to date, with the Dow Jones, S&P500 and Nasdaq currently trailing by 3.1%, 3.3% and 5.3% respectively.

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The sense of relief was palpable across Asian markets overnight, where much of the region is dependent on energy imports. Japan’s Nikkei 225 added 5% given its particular reliance on such imports, while indices across the board were higher as the relief rally took hold and investors re-entered the investment fray in their droves, based on some sort of return to normality.

The scramble for prices to attain a true equilibrium delayed the opening for many stocks within the FTSE100 by a few minutes, indicating that the coiled spring which had been in evidence was waiting to be unleashed. When prices settled, the premier index added almost 3%, leading to a cumulative gain of 6.6% in the year so far. 

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With the inevitable exception of the oil majors and Centrica (LSE:CNA), buffeted by the oil price decline and a warning on gas production from Shell (LSE:SHEL) given the effects of the conflict, the markup across stocks was almost universal. 

Resource stocks enjoyed double digit percentage gains, while International Consolidated Airlines Group SA (LSE:IAG) added almost 10%. Housebuilding stocks also advanced strongly given that the slim chance of interest rate cuts from central banks could be back on the table, while the more domestically focused FTSE250 powered ahead by almost 4%, sharply reducing its recent losses and now down by just 0.4% in the year to date.