Oil has plunged below $100 a barrel while stock markets rally after Iran and the US agreed to a two-week ceasefire that will open the Strait of Hormuz.
At the eleventh hour, Trump said he had agreed to pause the conflict so long as Iran reopened the Strait. It came just hours before Trump’s deadline for Iran to meet his demands or he would kill a ‘whole civilisation’.
Brent crude prices fell around 15 per cent after the announcement as Iran confirmed it would allow two weeks of ‘safe passage’ in the key shipping route, through which a fifth of the world’s oil passes.
The talks, led by Pakistan, will begin on Friday to discuss a 10-point plan, which includes control over the strait and the lifting of sanctions.
This morning, Brent crude is trading at around $93 a barrel,having traded at around $110 on Tuesday.
Asian markets welcomed the deal, with stocks surging overnight. South Korea’s Kospi, which has been hit hard by the war, jumped 6.5 per cent, while Japan’s Nikkei 225 rose 5.4 per cent.
Futures are pointing to a strong opening for the FTSE 100, too.
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FTSE surges and gilt yields slide
The FTSE 100 is up 280 basis points yo 10,632 as investors breathed a sigh of relief following news of the ceasefire.
L&G, Prudential and Howden Joinery all rose by over 5 per cent.
Gilt yields were on the slide as markets slashed their bets on Bank of England interest rate hikes this year.
The 5 year gilt yield, which moves inversely to price, fell 22 basis points to 4.238 per cent, while the 10-year yield dropped 19 basis points to 4.71 per cent.
Markets are now pricing in a 35 basis point hike this year – between one and two 25bps – compared to 63bps on Friday.
House prices slide on Middle East uncertainty
The average house price fell 0.5 per cent in March, following a 0.3 per cent in February, according to the latest Halifax house price index.
It meant that across the UK, the average house price was £299,677 last month.
Growth in property values also slowed, reaching 0.8 per cent, down from 1.2 per cent in February.
Amanda Bryden, head of mortgages, Halifax, said: ‘The recent slowdown in the housing market reflects the wide uncertainty regarding the conflict in the Middle East.
‘Concerns about higher energy prices have pushed up inflation expectations, which in turn led to a rise in mortgage rates, reducing confidence that interest rates will be cut this year and dampening the initial momentum in the market seen at the start of the year.’