Shares rally and oil price falls as war fears ease on Trump speech
The price of oil tumbled and European and US shares turned higher after President Donald Trump toned down rhetoric against Iran, suggesting further military force is not needed.
In the US, the S&P 500 pushed to a fresh intraday record after President Trump said Iran appears to be “standing down,” and announced further sanctions on the country.
Ten-year US Treasury yields rose after tumbling overnight following Iranian airstrikes on American bases in Iraq.
The Nasdaq indexes also notched all-time intraday highs as tech led the advance in equities. In Europe, the Euro Stoxx index of leading shares rose.
Sending shivers across global markets earlier in the session, Iranian forces fired missiles at military bases housing US troops in Iraq, in response to the US killing of general Qassem Soleimani.
Tehran’s foreign minister said Iran took “proportionate measures” in self-defense and did not seek to escalate the confrontation.
“The attack was much milder than many had feared. Also, it seems like the United States is gearing up to protect its interest in the Middle East,” said Mark Grant, chief global strategist at B. Riley FBR.
“A lot of this is a positive reaction to the fact that what has taken place so far hasn’t been worse,” Mr Grant said.
In a morning note, NatWest Markets said “there is an off-ramp here for US-Iranian tensions, or at least for the conflict to move back to the shadow-proxy-economic sanction realm where it has resided”.
Joshua Mahony, senior market analyst at online broker said President Trump's conciliatory tone meant that markets could breathe again lightly.
Despite approving further sanctions, Trump's comments on a desire to see peace between the two sides has dented demand for havens.
"In a week that has seen plenty of ups-and-downs, the Iranian issue has been the prime driver of direction.
"Thus, with Trump now appearing to draw a line under the issue, there is a strong chance that the recent risk-off move is going to reverse into the second half of the week," Mr Mahony said.
Markets settled back into a familiar risk-on mood that has pushed benchmarks to recent records, with investors betting that the president’s rhetoric will cool tensions in the Middle East.
The nervousness, caused by the US strike on a powerful Iranian general last week, had dented optimism over signs of economic resilience as well as a partial China-American trade deal.
The price of crude oil sank, giving up all its gains for the year, following a US statement that no personnel had been killed and as President Trump said Iran appeared to be standing down. As tensions eased, the price of Brent crude, the global benchmark, tumbled by $2.30 to trade at $65.95 a barrel.
“The intent by Iran to minimise the casualties from the attack last night deescalated the situation,” said Nick Holmes, portfolio manager at Tortoise, a US asset manager.
“That’s why crude traded off after the missile strike," he said.
In company news, Boeing shares fell after one of its Boeing 737 planes crashed in Iran. The Ukrainian airliner crashed shortly after take-off from Tehran, bursting into flames and killing all 176 people on board.
It was the Kiev-based carrier’s first fatal crash, and it said it was doing everything possible to establish the cause.
Bloomberg and Irish Examiner
