International Observation | Two-week ceasefire between the US and Iran boosts global markets; negotiation trajectory becomes a key variable

Xinhua News Agency, New York, April 8 — Title: Two-Week Ceasefire Between the US and Iran Boosts Global Markets; Negotiation Developments Become a Key Variable

Xinhua News Agency reporter Liu Yanan

Driven by news that the situation in the Middle East has eased, international markets have broken away from a prolonged slump. On the 8th, after the market opened, major stock indexes rose sharply, while the prices of gold and silver surged, and international oil prices once plunged by nearly 20%. Market participants believe that the news of a two-week ceasefire between the US and Iran and the start of negotiations has strengthened expectations that the Strait of Hormuz will reopen, which could bring potentially important impacts to market performance and even the economic operations of countries worldwide. However, the uncertainty surrounding US-Iran negotiations remains an important variable influencing market performance.

On the 7th, U.S. President Trump issued a threat to Iran, saying, “Tonight, all of civilization will perish, never to return.” Soon after, Trump posted on social media that he agreed to pause the bombing and attacks on Iran for two weeks, on the condition that Iran agrees to “open the Strait of Hormuz comprehensively, immediately, and safely.” Shortly afterward, the secretariat of Iran’s Supreme National Security Council released a statement saying that Iran would hold a two-week political negotiation with the United States in Islamabad. Within hours, international oil prices went through a “roller-coaster” pattern, swinging from sharp gains to a plunge.

On the 7th, New York crude oil futures briefly broke above $117 per barrel, but the gain narrowed by the close. After the ceasefire news emerged, during a new trading day starting on the evening of the 7th in U.S. Eastern Time, the May-delivery New York light sweet crude oil futures price fell below the $100 per barrel level, with losses once approaching 20%. The June-delivery London Brent crude oil futures price also saw losses once as high as 16%, before both rebounded somewhat and then traded in a tight range around $95 per barrel.

Meanwhile, gold and silver prices shifted from falling to rising sharply. June gold futures on the New York Mercantile Exchange climbed above $4,800 per ounce, with gains once nearing 4%. May silver futures’ rise once exceeded 6.5%, topping $76 per ounce.

Market participants noted that after the news of a two-week ceasefire between the US and Iran broke, markets expected the likelihood of the Strait of Hormuz being obstructed in the long term to decline. A softer U.S. dollar and falling oil prices supported gains in gold prices. Because the sharp drop in oil prices weakened inflation expectations, market expectations for a Federal Reserve rate cut rose, which also favored gold prices.

Ahmed Asiri, a strategist at Australia’s Aegis Financial, believes that the rise in gold prices reflects a reduced market expectation of long-term turmoil, but it does not mean that risk expectations have completely changed.

In stock markets, the easing of the Middle East situation helped push major stock indexes in Asia-Pacific and Europe higher on the 8th. Japan’s Tokyo stock market’s Nikkei 225 stock average closed up more than 5%, and the Tokyo Stock Exchange stock price index rose more than 3%. South Korea’s KOSPI gained nearly 7%. Australia’s benchmark S&P/ASX 200 index closed up 2.55%. After the market opened on the 8th, Europe’s STOXX 600 index, Germany’s Frankfurt stock market DAX index, and the UK’s London stock market Financial Times 100 stock average index rose by about 4%, 5%, and 3%, respectively.

As of 4:00 a.m. U.S. Eastern Time on the 8th, futures for the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 rose by 2.25%, 2.45%, and 3.2%, respectively.

Kevin Buck, managing director of Clear Viewpoint Energy Partners, said the market may interpret this ceasefire as significant because it includes conditions related to reopening the Strait of Hormuz.

However, analysts pointed out that despite the current optimistic sentiment, there are still underlying concerns that could put pressure on the market’s subsequent performance. On one hand, the format of US-Iran negotiations remains unclear, demands differ significantly, and in previous US-Iran talks, there were two instances where the U.S. suddenly launched military action against Iran, raising worries about whether the ceasefire can be implemented smoothly and whether negotiations can long-term resolve the standoff. On the other hand, global energy supplies have been disrupted for more than a month, producing lasting, tangible impacts that are difficult to quickly clear up through a short ceasefire. Analysis from Axios News said that the current situation does not mean oil supplies can quickly recover, and oil prices will likely remain high. Even if the US and Iran reach a final ceasefire agreement, the market will still focus on whether the agreement provides sufficient certainty for shipping.

Neil Newman, strategic director at Asteris Consulting in Japan, views the current US-Iran ceasefire as “very fragile” and temporary, and has doubts about how long it can last.

Analysis from The Wall Street Journal noted that the US and Iran still have a long way to go before reaching a long-term agreement. There are still differences between the two sides on key issues such as control of the Strait of Hormuz, Iran’s nuclear program, and the lifting of sanctions. (End)