Oil prices fell and global stock markets traded mixed on Thursday as investors awaited an update on a US plan to end the Middle East war and reopen the Strait of Hormuz. After having plunged more than 10% at one point on Wednesday on peace hopes, crude futures fell more than another 2%. The benchmark international oil contract Brent Crude was back under $100 per barrel.
Wall Street traded mixed, European stock markets declined after big gains the previous session, while leading Asian markets climbed. Tokyo soared 5.6%, which largely reflected the resumption of trading in Japan after the country’s public holidays this week. According to the International Monetary Fund, the global economy is closely watching the developments in the Middle East.
Impact on Oil Prices
The wild streak of enthusiasm which hit markets amid hopes for a major de-escalation in the Iran conflict is tempering, noted Susannah Streeter, chief investment strategist at Wealth Club. There’s a realisation that there are more hurdles to climb for a longer-term resolution to be agreed, even though Iran is reported to be studying a US peace proposal aimed at formally ending the conflict.
US President Donald Trump said an agreement could be near after positive talks, with Iran adding that it would pass on its latest position to mediator Pakistan. The war, launched by the United States and Israel in late February, has seen Iran respond with attacks across the Middle East and impose a chokehold on the Strait of Hormuz, the gateway to the Gulf oil and gas industries and a strategic trade route.
Foreign Exchange and Inflation
In foreign exchange on Thursday, the dollar lost some of its safe haven support. Investors in Tokyo were closely watching the yen after speculation of intervention by the Japanese government to prop up the beleaguered currency. Norway’s central bank on Thursday hiked its guiding rate by a quarter point to 4.25%, citing a risk that the war in the Middle East could worsen already elevated inflation.
Here are some key points to consider:
- Inflation is too high and has run above target for several years, said Norges Bank governor Ida Wolden Bache.
- The war in the Middle East could have a significant impact on global oil prices and inflation.
- Investors are closely watching the developments in the Middle East and their potential impact on the global economy.
Away from the war, there has been a fresh wave of cash pumped into the technology sector as traders snap up all things artificial intelligence, helped by standout earnings from Apple, Google parent Alphabet, Microsoft and Samsung during the ongoing first-quarter reporting season.
It does feel as if US stock indices are in a melt-up phase, said Trade Nation analyst David Morrison, using an expression for a situation when a large amount of money is invested in stocks in a short period of time. Both the S&P 500 and the tech-heavy Nasdaq Composite set fresh all-time highs as trading got underway, even if they only edged higher.
