SYDNEY: Global shares rallied and the dollar extended declines on Tuesday after U.S. President Donald Trump said Iran and Israel had agreed to a ceasefire, sending into a deep dive as concerns over supply disruptions ebbed.
Writing on his Truth Social site, Trump implied a ceasefire would go into effect in 12 hours, after which the war would be considered “ended”.
A senior Iranian official confirmed Tehran had agreed to the ceasefire with Israel. Israel’s Channel 12 reported Prime Minister Benjamin Netanyahu had agreed in a conversation with Trump to a ceasefire as long as Iran stopped its attacks.
Oil prices fell almost 4%, having already slid 9% on Monday when Iran made a token retaliation against a U.S. base, which came to nothing and signalled it was done for now.
With the immediate threat to the vital Strait of Hormuz shipping lane seemingly over, U.S. crude futures fell another 3.4% to $66.24 per barrel, the lowest since June 11.
“To the extent that we’ve got a reduction in the risk of a renewed oil price spike, I think that plays positively from a risk point of view. I think it sort of removes that downside global growth risks,” said Ray Attrill, head of FX strategy at the National Australia Bank.
“I think that would encourage people in the view that maybe the U.S. dollar can sort of resume its downtrend here and that.”
Risk assets rallied, with S&P 500 futures up 0.5% and Nasdaq futures 0.7% higher. EUROSTOXX 50 futures jumped 1.1% and FTSE futures rose 0.3%.
The MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.8% while Japan’s Nikkei rallied 1.3%.
News of the ceasefire saw the dollar extend an overnight retreat and slip 0.3% to 145.70 yen, having come off a six-week high of 148 yen overnight. The euro rose 0.2% to $1.1594 on Tuesday, having gained 0.5% 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.