Stocks soar and oil dives as ceasefire announced
News of a ceasefire in the Middle East has bolstered risk appetite, driving stocks higher and causing oil prices to nosedive.
Stocks soar as Trump announces a ceasefire
Is it over? Barely 48 hours after attacking Iran with the largest bomb used since the end of the Second World War, President Trump has announced a ceasefire between Israel and Iran.
Iran’s response to the US attack was a carefully signalled and limited attack that caused no damage but provided enough of a response for Tehran. It appears that there will be no further attacks by the US on Iran, or vice-versa. Stocks reacted enthusiastically to the lack of further escalation, pushing higher during the US session, and then bullish momentum went into overdrive during the night as a ceasefire was announced.
Oil prices back at $65.00
It was a mad 24 hours in crude oil markets. The US strike on Iran sent crude to its highest level in weeks, but gains were already being trimmed in Monday’s opening hours. The ceasefire news delivered a fresh blow to oil bulls, sending the price down towards $65.00 for US light crude, its biggest one day drop since August 2022.
What happens now?
Now that further strikes on Iran by the US appear to be off the table, it appears we can look forward to a continued recovery in equity markets. Two Federal Reserve (Fed) governors have recently said that they would back a July rate cut, and the reversal of the oil price surge means that inflation worries will ease further.
Stocks do have a three-week window now to move higher ahead of the next US earnings season, which begins on 15 July. After a period of consolidation or pullback for most indices, yesterday’s news appears to have given buyers the upper hand once again.
The calendar for the week is relatively light, but testimony from Fed chairman Jerome Powell may provide some interest now that the situation in the Middle East appears to have calmed down.
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