Global stock markets surged as the U.S. dollar continued to weaken on Tuesday after a ceasefire between Iran and Israel took effect, bringing an end to 12 days of conflict. Meanwhile, oil prices dropped to their lowest levels in nearly two weeks, as fears of supply disruptions eased.
The market reaction followed a late Monday announcement by U.S. President Donald Trump, who said that both nations had agreed to a ceasefire. Hours later, Trump confirmed that the truce was officially in place and called on both sides to uphold the agreement.
Oil drops over 3 percent as stocks surge
As global stock markets rallied, oil prices dropped more than 3 percent on Tuesday, following a 9 percent decline in the previous session after Iran launched a symbolic strike on a U.S. base and indicated it would not take further action for now.
With the immediate risk to the crucial Strait of Hormuz shipping route appearing to have subsided, U.S. crude futures fell another 3.7 percent to $65.96 per barrel — their lowest level since June 11, prior to the start of Israel’s strikes on Iran.
As market concerns ease regarding an escalation in Middle East tensions, attention is now likely to turn to the looming tariff deadline in two weeks.
Following the ceasefire announcement, S&P 500 futures gained 0.80 percent and Nasdaq futures rose 1.13 percent. In the European stock market, EUROSTOXX 50 futures gained 1.92 percent and FTSE 100 Futures were up 0.50 percent.
In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 2.2 percent while Japan’s Nikkei rallied 1.07 percent. In addition, China’s blue chips rose 1.04 percent, while Hong Kong’s Hang Seng index gained 1.95 percent.
Read: Crude oil prices plunge 3 percent to $68.75 as tensions ease in the Middle East
U.S dollar slips as euro and yen strengthen
As global stock markets rallied and oil prices dipped, the dollar extended its overnight decline and slipped 0.5 percent to 145.43 yen after reaching a six-week high of 148 yen overnight. The euro rose 0.2 percent to $1.1603 on Tuesday, after gaining 0.5 percent overnight.
The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter. The yen and euro gained ground as oil prices fell, given that both the European Union and Japan are major importers of oil and liquefied natural gas. In contrast, the United States is a net energy exporter.
In addition to the decline in oil prices, gold prices saw a decline, reaching a near two-week low on Tuesday as risk appetite improved following U.S. President Donald Trump’s announcement that Iran and Israel had agreed to a ceasefire, which diminished demand for safe-haven assets. Spot gold was last trading 1.60 percent lower at $3,325.3.
