Oil prices rise and stocks fall as investors wary of ‘fragile’ US-Iran ceasefire
Iran agreed to temporarily reopen the Strait of Hormuz, but closed the waterway again on Wednesday night in response to Israeli attacks on the Hezbollah militant group in Lebanon
Oil prices have jumped again and stock markets have faltered as investors were wary over a “fragile” ceasefire in Iran, despite following a relief rally in the US.
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The price of Brent crude oil was rising by about 3.5 per cent to 98 US dollars a barrel on Thursday morning.
On Wednesday, oil fell back sharply to lows of about 90 US dollars a barrel following the announcement of a two-week ceasefire between the US and Iran.
Iran agreed to temporarily reopen the Strait of Hormuz, but closed the waterway again on Wednesday night in response to Israeli attacks on the Hezbollah militant group in Lebanon.
Stock markets opened in the red on Thursday, with the UK’s FTSE 100 edging lower by about 0.2 per cent in early trading.
There were deeper losses elsewhere in Europe, with France’s Cac 40 down 0.5 per cent and Germany’s Dax falling by 1 per cent.
The declines come despite a rally on Wall Street on Wednesday night, with the S&P 500 surging by 2.5 per cent and the Dow Jones by 2.85 per cent on the back of the ceasefire agreement.
Experts said doubts about the stability of the deal in the Middle East were showing up in investor sentiment.
Richard Hunter, head of markets at Interactive Investor, said: “Relief has now been reflected in market movements, but the next challenge is to turn this into belief.
“There have already been reports that the ceasefire is a fragile one, with further Israeli attacks on Lebanon.
“This has led to threats that Iran could withdraw from the truce if the attacks continue, while White House comments have remained aggressive as forces remain in the area, poised to act if necessary.”
Susannah Streeter, chief investment strategist for Wealth Club, said: “While overall there is still hope that the truce with Iran will hold, it’s becoming clear just how complex achieving a longer-lasting deal in the Middle East will be.”
She said the Strait of Hormuz is a “chokepoint for global energy supplies” but remains “largely obstructed”.
“Even if shipments resume, the risks won’t disappear overnight,” Ms Streeter added.
“Tankers may be forced to navigate mined waters and a heightened military presence, all of which will keep insurance premiums high and freight costs elevated.”
Kathleen Brooks, research director for XTB, said that oil prices remaining below 100 dollars a barrel on Thursday “could be a sign that investors remain hopeful of a breakthrough in the coming days, or at least firmer foundations for the ceasefire to take hold”.
“This could limit the downside for risk in the short term, and it could cap oil price gains,” she said.