Global markets surge as Iran says Strait of Hormuz open during ceasefire

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LONDON, April 17 : Stocks and bond prices jumped on Friday, while oil and the dollar fell sharply after Iran's foreign minister said passage for all commercial vessels through the Strait of Hormuz is declared completely open for the remaining period of ceasefire, in line with the ceasefire in Lebanon.

Oil dropped as much as 10 per cent to below $90 a barrel immediately after the news, while short-dated government bond yields tumbled as investors priced out the likelihood of near-term rate hikes, especially in Europe, and stocks surged. 

The dollar, which has acted as a safe-haven since the start of the war in late February, fell sharply against the euro, pound and yen.

COMMENTS: 

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NICK KENNEDY, CURRENCY STRATEGIST, LLOYDS, LONDON:    "For starters, I don't think it's surprising and (talks) has been moving in this direction."    "From a markets perspective it's about the duration of the disruption, so the swifter transit can get through the better, and markets reprice the outlook."    "The moves are all in the right direction, it's just difficult to position for the news and it's difficult to believe."

MICHAEL BROWN, SENIOR RESEARCH STRATEGIST, PEPPERSTONE, LONDON:

"It's all well and good having a ceasefire and we don't want kinetic action to resume, of course. But during the ceasefire thus far, we've still seen the whole Strait of Hormuz remaining impassable. We've still had commodity conditions continuing to tighten. If we move to a situation where actually the path is still towards de-escalation - but we now have the bonus of commodity flows through Hormuz getting back to something resembling a normal level that we saw pre-conflict - then that's obviously removing a pretty chunky tail risk for the economy as well. And I think that's why markets are reacting so positively."

LARS SKOVGAARD, SENIOR INVESTMENT STRATEGIST, DANSKE BANK, COPENHAGEN

"I think it will be positive but not something that will propel the market higher. You will most likely see some index rotation, a rebound in leisure names for example, and then we start focussing on earnings.

It could lead to outperformance in Europe compared to U.S. and you could see a rebound in emerging markets."

TOM DI GALOMA, MANAGING DIRECTOR OF GLOBAL RATES TRADING, MISCHLER FINANCIAL GROUP, PARK CITY, UTAH:

"Oil is falling pretty good here… I think that that's what's driving the whole move.” 

"Do we actually get a prolonged ceasefire and a straight opening? I don't know. This seems like it's going to take some time to work itself out. But right now, I think that's what's going on… It's all the good news coming out of the Gulf."

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