Wall Street stocks flourish, oil dives below $90 after Iran says Strait of Hormuz is open
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NEW YORK/LONDON, April 17 : Wall Street stocks followed global indexes higher and the price of oil tumbled more than 11 per cent on Friday after Iran's foreign minister said that the Strait of Hormuz was open for passage while a ceasefire in the three-week-old war launched by the U.S. and Israel is in force.
Abbas Araqchi said in a post on X that passage for all commercial vessels through the Strait of Hormuz, a key conduit for global energy flows, was declared completely open for the remaining period of the ceasefire, in line with a ceasefire in Lebanon.
Benchmark Brent crude futures nosedived to $87.94 a barrel, down 11.5 per cent on the day. U.S. crude fell a similar amount to $83.33 a barrel. . While still above pre-war levels that were around $70, that is down significantly from late March's highs, which, for Brent, were close to $120 a barrel.
Stocks around the world, which had already been trading around record highs, jumped further on the news.
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The S&P 500, which reached fresh records this week, rose 1.15 per cent, to 7,115.31. The Dow Jones Industrial Average rose 1.95 per cent, to 49,524.91. The Nasdaq rose 1.15 per cent, to 24,378.97, and the Russell 2000 small cap index also rose to a record. [.N] Europe's STOXX 600 rose 1.49 per cent having been close to flat before the news.
"This is clearly positive news and should bring some relief for oil prices and eventually also for consumers," said Carsten Brzeski, global head of macro at ING.
"However, the question is whether, even if Iran claims to open the Strait, whether vessels will really dare passing? Insurers and shipowners might still be hesitant to send through vessels, which means that even if in theory open, traffic through the Strait will only very gradually pick up."
Energy stocks that benefit from high oil prices fell. Oil and gas names in Europe slid 4.5 per cent, followed by U.S. majors Exxon Mobil and Chevron which shed around 5 per cent each. Airline shares gained, with American Airlines up around 8 per cent.
In a different kind of drama, Netflix shares fell more than 9 per cent after the streaming service delivered a downbeat growth forecast and said chairman and co-founder Reed Hastings was leaving the company.
'CHUNKY TAIL RISK'
Government bonds rallied, with the benchmark U.S. 10-year Treasury yield touching its lowest since mid-March and last seen down 7.5 basis points to 4.234 per cent. The 2-year note, which typically tracks expectations of rate moves from the Federal Reserve, fell 7.6 basis points to 3.702 per cent.
Treasuries had held up better than European bonds since the war began because the United States, as a net energy exporter, is relatively insulated against surging energy prices.
Traders pared back bets that those price rises would prompt the European Central Bank and Bank of England to raise rates on Friday, helping German 10-year Bunds fall 7.5 basis points to 2.958 per cent. Germany's rate-sensitive 2-year yield fell 10.7 basis points to 2.417 per cent.
"If we move to a situation where 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," said Michael Brown, senior research strategist at Pepperstone.
"I think that's why markets are reacting so positively."
The dollar also slid and was on track for a second straight weekly decline as investors unwound positions in the safe-haven currency. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.51 per cent to 97.71.
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