GLOBAL stocks rebounded from a four-month low yesterday after US President Donald Trump announced he would order the military to postpone any strikes against Iranian power plants and energy infrastructure, easing fears over the repercussions of a deeper oil shock.
The comments came hours ahead of a deadline that threatened further escalation in the conflict, now in its fourth week. Trump added in a post on his Truth Social platform that the US and Iran had had ‘VERY GOOD AND PRODUCTIVE’ conversations over the past two days about a ‘COMPLETE AND TOTAL RESOLUTION OF HOSTILITIES IN THE MIDDLE EAST’.
Oil prices tumbled by more than 8 per cent, the dollar fell against other major currencies and government borrowing costs also eased. “The market woke up to some potentially good news out of the Middle East on Monday. But follow-through on any relief rally will likely require tangible follow-through on the geopolitical front,” said Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley.
Trump said the postponement followed productive conversations with Iran. But Iran’s Tasnim news agency, citing an Iranian official, said that the Strait of Hormuz would not return to pre-war conditions and energy markets would remain unsettled, adding that no negotiations with the US were under way.
US crude fell 8.58pc to $89.80 a barrel and Brent fell to $101.89 per barrel, down 9.14pc on the day.
Government bond yields, which had risen ahead of Trump’s comments on expectations for central bank rate hikes in Europe, moved lower.
The Dow Jones Industrial Average rose 655.41 points, or 1.44pc, to 46,232.88, the S&P 500 rose 77.50 points, or 1.19pc, to 6,583.98 and the Nasdaq Composite rose 273.61 points, or 1.26pc, to 21,921.22. MSCI’s gauge of stocks across the globe rose 4.77 points, or 0.49pc, to 986.08. The pan-European STOXX 600 index rose 0.61pc.
British government bond prices surged later yesterday, pushing two-year gilts towards their biggest daily gain in nearly a year.
The rally marked a sharp turnaround from days of heavy selling which earlier yesterday had pushed benchmark 10-year gilt yields to their highest since July 2008 at 5.118pc on concerns that prolonged conflict would push up British inflation and government borrowing.
But less than half an hour after hitting that peak, the yield on the benchmark 10-year gilt had tumbled to 4.895pc as the price of the bond rallied.
By yesterday evening, the 10-year gilt yield was down 6 bps from Friday’s close at 4.94pc, while the two-year gilt yield was 13 bps lower at 4.45pc, its biggest daily fall since April 3.
In the US, two-year and 10-year Treasury yields were 5 to 6 basis points lower, with the 10-year yield last at 4.344pc.
The dollar was broadly soft, having traded higher against most other currencies until the headline hit.
The euro was last up 0.4pc at $1.1616.
“It’s clearly jawboning in the face of the meltdown that we’ve seen. We’re seeing a bit of a knee-jerk reaction to this positive news,” said Elias Haddad, global head of markets strategy at Brown Brothers Harriman.
“There’s certainly room for a bit of an unwind in the fear trade. A more sustained rally in risk assets will depend on whether this is legit de-escalation or simply a pause before a next leg up in escalation.”
Meanwhile, stock markets in the UAE tumbled yesterday after Iran warned it could target energy and water infrastructure across the Gulf if US President Donald Trump carries out his threat to strike the country’s electricity grid.
However, after Gulf markets closed, world stocks rallied after Trump said he would order the US military to postpone any strikes against Iranian power plants and energy infrastructure.
Dubai’s main share index dropped 3pc yesterday, led by a decline in heavyweight real estate and telecom stocks. Blue-chip developer Emaar Properties slumped 4.6pc, while telecom operator Emirates Integrated Telecommunications fell 4.5pc. Top lender Emirates NBD Bank and low cost carrier Air Arabia both dropped 4.9pc.
Abu Dhabi’s benchmark index slipped 1.5pc with real estate giant Aldar properties and biggest lender First Abu Dhabi Bank falling 5pc each.
The Abu Dhabi-listed water and Electricity firm Abu Dhabi National Energy Company (better known as TAQA) declined 4.8pc. Heightened uncertainty fuelled risk aversion, triggering broad declines across most sectors as heavyweight stocks dragged on the overall market, said Joseph Dahrieh, managing director at Tickmill.
“Firms in the banking, real estate, and other sectors continue to maintain strong financial positions, leaving the market well-placed for a recovery once risk aversion fades and investor appetite for risk begins to improve,” he said.
Adnoc Gas settled 1.5pc lower after the firm said it made temporary adjustments to its production of liquefied natural gas and export-traded liquids in response to ongoing shipping disruption in the Strait of Hormuz. “Operations are continuing safely across Adnoc Gas plc’s asset base,” Adnoc Gas said.
“Following debris falling near certain facilities, inspections confirmed no injuries and no impact to core processing integrity.”
The Dubai index has now fallen 11pc year-to-date, while Abu Dhabi’s has declined 5.7pc, according to LSEG data.
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