Shares rally, oil slumps as Iran-Israel ceasefire goes into effect
SYDNEY :Oil tumbled 4 per cent, global shares surged and the dollar dropped on Tuesday as U.S. President Donald Trump said a ceasefire between Israel and Iran was in place, a dramatic turnaround after the U.S. bombed Iran's nuclear sites over the weekend.
Brent futures had already slid 7 per cent on Monday and U.S. shares jumped after Iran made a token retaliation against a U.S. base and signalled it was done for now.
With the immediate threat to the vital Strait of Hormuz shipping lane seemingly over, the global benchmark was last at $67.68 a barrel, its lowest since June 11. U.S. crude futures dropped 3.6 per cent to $66.02 a barrel.
"With markets now viewing the escalation risk as over, market attention is likely to shift towards the looming tariff deadline in two weeks' time," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities.
"Our sense is that the quicker than expected resolution to the Middle East conflict leads to expectations for a swifter resolution on tariffs and trade deals."
But for now, equity markets were basking in the eased geopolitical tensions.
Risk assets rallied, with S&P 500 futures up 1 per cent and Nasdaq futures 1.3 per cent higher. Europe's Stoxx 600 gained 1.3 per cent in early trade, with travel stocks, such as airlines surging 4 per cent while oil and gas names shed 3 per cent.
Earlier in the day MSCI's broadest index of Asia-Pacific shares outside Japan jumped 2.2 per cent while Japan's Nikkei rallied 1.1 per cent.
On trade, two sources told Reuters that Japan's tariff negotiator Ryosei Akazawa was arranging his seventh visit to the United States for as early as June 26, aiming to end tariffs that are hurting Japan's economy.
Government bonds largely looked through the news. The war has been a challenge for bond traders to process as they have had to weigh safe haven flows against the effect of higher oil prices on inflation.
RATE CUTS APPROACHING?
Federal Reserve Vice Chair for Supervision Michelle Bowman said the time to cut interest rates was getting nearer as risks to the job market may be on the rise.
That followed Fed Governor Christopher Waller saying on Friday he would consider a rate cut at the July 29-30 meeting.
Fed Chair Jerome Powell will have his own chance to comment when appearing before Congress later on Tuesday and, so far, has been more cautious about a near-term easing.
Markets still only imply around a 22 per cent chance the Fed will cut at its next meeting on July 30, but a September cut is near to fully priced.
Ten-year Treasury yields were mostly steady at 4.33 per cent, having declined 5 bps overnight. Germany's 10-year yield was flat at 3.52 per cent
News of the ceasefire saw the dollar extend an overnight retreat and slip 0.7 per cent to 145.43 yen , having come off a six-week high of 148 yen overnight.
The euro rose 0.2 per cent to $1.1602 on Tuesday, having gained 0.5 per cent overnight.
The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter.
The risk-on mood saw gold prices ease 1 per cent to $3,333 an ounce.
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CNA
an hour ago
- CNA
Euro rises, yen jumps as oil falls after Israel-Iran ceasefire
The euro and the yen rose against the dollar on Tuesday after the announcement of a ceasefire between Israel and Iran triggered a sharp drop in oil prices, though investors remained cautious about the outlook in the Middle East. The European Union and Japan rely heavily on imports of oil and liquefied natural gas, while the U.S. is a net exporter. U.S. President Donald Trump said on Tuesday that both Israel and Iran violated a ceasefire he announced hours earlier, adding that Iran's nuclear capabilities were gone. Iraq said on Tuesday that drones targeted several military sites and bases belonging to Iraqi security forces, highlighting instability in the region. Oil fell 2.9 per cent, while global shares surged, with the threat to the vital Strait of Hormuz shipping lane seemingly over, but analysts flagged the high level of uncertainty. "The first piece of uncertainty we face is whether the conflict between Israel, the U.S. and Iran is now over," said Kit Juckes, macro strategist at Societe Generale, mentioning reports of further missile launches. "After that, we don't know what the strikes in Iran will mean for the leadership of the country," he added. The euro rose 0.16 per cent to $1.1597. It hit $1.1632 a couple of weeks ago, its highest level since October 2021. It climbed almost 0.5 per cent in the previous session, fuelled by scepticism that tensions would escalate further after Iran's retaliatory strike on an American air base in Qatar was widely seen as symbolic. "The euro continues to benefit from the buildup of dollar shorts and its substitution value rather than any strong euro zone narrative," said Francesco Pesole, forex strategist at ING. The safe-haven status of the dollar has been under scrutiny due to concerns over U.S. fiscal policy and potential shifts in global reserve currency preferences. "Incidentally, the drop in oil prices means concerns about the erosion of euro fundamentals are dissipating," Pesole added. The dollar fell 0.74 per cent to 145.07 versus the yen. The risk-sensitive Australian dollar got a lift and last traded 0.75 per cent higher at $0.6510, as did the New Zealand currency, which rose 0.95 per cent to $0.6034. Israel's shekel rallied sharply too, jumping 1.9 per cent against the dollar to its strongest since February 2023. Adding to the pressure on the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the U.S. central bank should consider interest rate cuts soon, triggering a fall in U.S. Treasury yields. Against a basket of currencies, the dollar was down 0.15 per cent at 98.07, extending its more than 0.5 per cent decline in the previous session. Fed Governor Christopher Waller said in a television interview last week that he would consider a rate cut at next month's meeting as well. Mohit Kumar, economist at Jefferies, said he expected U.S. rates to be at the neutral level when Chair Jerome Powell leaves in 2026. Fed estimates see the real neutral rate slightly below 1 per cent, the inflation target is 2 per cent. "We are not in the July camp, but do believe that data should show signs of weakness over the summer months and hence prompt a rate cut in September," Kumar said. Trump said on Tuesday that U.S. rates should be lowered by at least two to three percentage points. Markets are now pricing in close to a 23 per cent chance the Fed could ease rates in July, up from 14.5 per cent a day ago, according to the CME FedWatch tool. Fed Chair Jerome Powell is due to testify before the U.S. Congress on Tuesday and Wednesday, where focus will be on the outlook for U.S. rates.
Straits Times
an hour ago
- Straits Times
Singapore shares rise on Israel-Iran ceasefire and Wall St rally; STI up 0.7%
The benchmark Straits Times Index gained 0.7 per cent or 25.04 points to 3,904.3. PHOTO: LIANHE ZAOBAO Singapore shares rise on Israel-Iran ceasefire and Wall St rally; STI up 0.7% SINGAPORE - Local shares ended higher on June 24, tracking a rally on Wall Street after the US brokered a ceasefire in the conflict between Israel and Iran. The benchmark Straits Times Index (STI) gained 0.7 per cent or 25.04 points to 3,904.3. Across the broader market, gainers outnumbered losers 346 to 174, after 1.2 billion securities worth $1.4 billion changed hands. Elsewhere in Asia, key indexes largely closed higher. The Hang Seng Index rose 2.1 per cent, the Nikkei 225 gained 1.1 per cent and the Kospi was up 3 per cent. Meanwhile, the FTSE Bursa Malaysia KLCI lost 0.2 per cent. Mr James Ooi, market strategist at Tiger Brokers, said there were already signs of a relatively muted market impact from the Israel-Iran conflict, and investors now appear to be pricing in a potential extension of the ceasefire. But investors still need to remain cautious, he said. 'If the conflict re-escalates, particularly if oil prices spike again, it could reignite inflation fears and trigger renewed market volatility,' he said. In the meantime, market participants are likely to stay focused on larger macro drivers such as ongoing tariffs, deregulations, tax cuts, and US President Donald Trump's anticipated 'Big Beautiful Bill', he added. On the STI, Jardine Matheson Holdings was the top gainer, rising 2.3 per cent to US$46.35. Singtel was the biggest decliner, falling 1.5 per cent to $3.83. The local banks were up. DBS Bank gained 1 per cent to $44.30, OCBC Bank rose 1.4 per cent to $16.16 and UOB closed 1.6 per cent higher at $35.32. THE BUSINESS TIMES Join ST's Telegram channel and get the latest breaking news delivered to you.
Business Times
an hour ago
- Business Times
So much for the US dollar's safe-haven rally; de-dollarisation still has some teeth: analysts
[SINGAPORE] The US dollar's recent bout of strength – a short-lived one – amid rising Israel-Iran tension signals that the greenback's safe-haven status is intact. But its swift slide on news of a ceasefire on Tuesday (Jun 24) also suggests that the de-dollarisation narrative is still in play, said analysts. Deutsche Bank's global head of emerging markets and Asia-Pacific research, Sameer Goel, told The Business Times: 'The price action last week, including in Asian currencies, in response to geopolitical risk in the Middle East supports the more traditional safe-haven appeal of the dollar. 'But I don't think that reverses the de-risking trend in global markets to re-calibrate their unhedged exposure to the dollar,' he said. Goel said that two concurrent dynamics are underway in markets: One is a more cyclical de-risking from the unhedged concentrated exposure to the US dollar; the second is a slower, but more structural de-dollarisation trend, in line with shifts in global trade and payment systems. The de-risking relates more to the reduced appeal of growth/rates/fiscal exceptionalism that has underpinned the greenback's outperformance in the last few years. It is also about finding the appropriate price – the value of the US dollar and/or yields – to continue funding the US' large twin deficits, he said. The economist added that de-dollarisation is more about growing alternative non-dollar pools of liquidity to fund global trade and capital market transactions. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up MUFG Bank's senior currency analyst, Michael Wan, agreed that the shift to rebalance away from the US dollar was intact despite 'some speed bumps or detours, and beyond week-to-week market gyrations'. 'The gravitational pull is still there,' he concluded, noting that key drivers for Asian economies include significant existing overweights in US assets, greater supply-chain fragmentations, and longer-term fiscal concerns in the world's largest economy. A refuge, no less That said, Julius Baer economist David Meier maintained that US dollar weakness since the beginning of the year is not necessarily at odds with its safe-haven characteristics. 'A country's reserve currency status is built on a combination of preconditions, including a large, stable economy, institutional strength/warranting of property rights, deep financial markets and is protected by military strength – all of which remain intact in the US,' he said. 'Although erratic policymaking is casting doubts on its institutional strength, as long as property rights remain warranted, the safe-haven character of the US dollar should hold.' Moody's Analytics director and head of Asia-Pacific Economics, Katrina Ell, agreed that the greenback was still an attractive haven asset. She noted that recent heightened uncertainty due to the US' 'chaotic protectionist stance' had driven its assets to be less attractive as it was the source of the instability; then escalated Middle East tensions once again sent investors back to the greenback. Currency moves The US dollar index over the weekend crept up towards the key 100 threshold – a level last hit in late May – after US President Donald Trump's posted on Truth Social on Sunday (Jun 22, Asian time) about the 'very successful air strikes' on three Iranian nuclear sites. The American currency reversed its trajectory late Monday evening, weakening after the US Federal Reserve governor teased an interest rate cut at the next policy meeting in July. It sank further Tuesday morning to around the 98 level as Trump announced a 'complete and total' ceasefire between Israel and Iran. In response, major East Asian and South-east Asian currencies – which have mostly logged year-to-date gains against the US dollar – first weakened over the weekend, and then reversed their losses at the start of the week. The won, ringgit and the Philippine peso recorded some of the largest movements against the greenback. Julius Baer's Meier said that the earlier underperformance can be attributed to their 'higher cyclicality and greater sensitivity to risk aversion', which he noted as greater than the Asian safe-haven Singapore dollar or the Chinese yuan renminbi offshore's policy-driven stability. Litmus tests On the psychological levels of the US dollar index he is watching in the near- to medium-term, which could signal a continuation of the safe-haven rally versus a reassertion of the de-dollarisation narrative, Meier flagged 97 as the most recent support level, and 99 as the resistance level. But he cautioned that defining levels is more in the realm of technical analysis than fundamental analysis. MUFG Bank's Wan noted: 'In the very near term, I'm looking for the 99.415 level at the 50-day moving average for the US dollar index to hold for the next downtrend.' If the greenback's safe-haven rally still has legs, the analyst expects its strength to be accompanied by a rally in US treasuries and/or equities. 'Conversely, if the de-dollarisation narrative is re-asserting itself, I would expect dollar weakness to be combined with bond markets outside the US doing better than the US, US equities lagging the rest of the world, and/or alternative safe havens (whether perceived or otherwise) such as gold, bitcoin, yen, franc and perhaps even the Singapore dollar, to do well.' Policy pivot or pause? On the Fed's and regional central banks' next moves, analysts are divided. Moody's Analytics' Ell cautioned that the threat of widespread tariffs remains a dark cloud, which means a sustained energy price increase would be a body blow. 'If this conflict keeps upward pressure on energy prices, the expectation that global inflation will stay contained should be abandoned,' she said. Julius Baer's Meier acknowledged that higher oil prices may exacerbate upside inflation risks, but maintained that the house anticipates only a temporary spike in oil prices. 'We do not expect the conflict to escalate to the point of closing the Strait of Hormuz, leading to a significant oil crisis, (hence) the impact on inflation is likely to remain within limits,' he said. 'Consequently, we do not expect this conflict to be a factor that would delay further monetary policy easing by the Fed or other global central banks,' added Meier. Deutsche Bank's Goel noted that the increasing signs of difference in opinion within the Federal Open Market Committee on whether the central bank should stay on the sidelines in the face of elevated uncertainty, or act more imminently to ease rates. He said: 'A weaker dollar, meanwhile, together with reduction in geopolitical tail risk as it relates to a supply-side shock to oil prices, should give more comfort and space for Asian central banks to ease monetary policy.'
