A wave of relief has hit financial markets after threats of a devastating escalation of the war were replaced by a temporary truce, according to Wealth Club’s Chief Investment Strategist Susannah Streeter.
European stock markets soared at the start of trading this morning as investor relief indices surging.
The Dublin market also opened with strong gains, jumping by 5.8%.
Among the big gainers were Ryanair, Kingspan, Cairn Homes and Glenveagh Properties.
The Frankfurt index surged 5%, shares in Paris rallied 4.3% and London jumped 2.6 in early deals, with airlines among the biggest gainers as oil prices plunged.
However Ms Streeter warns it is still a highly unpredictable situation and deep damage has already been done.
Speaking on RTÉ’s Morning Ireland, she said this is also being reflected in oil prices.
“Iran will reopen the Strait of Hormuz under the deal, a pledge which sparked a sharp fall in Brent crude from above $110 a barrel to $91,” she said.
“but it’s been creeping higher, as realisation dawns that allowing more tankers through won’t relieve the energy squeeze immediately,” she said.
“Oil and gas facilities have been damaged across the Gulf, refining capacity has been badly disrupted and there’s a long global queue of demand,” Ms Streeter added.
She said it could take years for supplies to be restored to pre-conflict levels due to the extensive repairs which will need to be carried out.
“Although prices at the pumps may ease off in the coming weeks, they still could remain stubbornly high if oil prices hang around this level,” she explained.
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“They are currently more than 35% higher than the level back in mid-February before tensions started to seriously ratchet up in the Middle East,” she said.
Ms Streeter noted that countries like Bahrain, Qatar and the UAE will all be assessing the damage and trying to work out just how quickly production can be ramped up.
Ahead of the ceasefire agreement, markets remained somewhat muted as investors retained a wait and see position.
But financial markets today welcomed the news, despite some uncertainty over how quickly the flow will resume the Strait of Hormuz.
“I think there will be some bold moves,” commented Ms Streeter.
“For example, a number of different companies in the consumer discretionary sector are really badly affected, from airlines to house builders, and there will be some hopes that perhaps the worst-case scenario may not materialise so there may well be a bit of bargain hunting going on,” she explained.
However, she added that its unlikely to see a real sustained recovery in the share prices of those companies due to the complexity of the situation.
“I think the effect on consumer demand and also more general economic growth is going to take time to assess, and of course, we still don’t yet know what’s going to happen with interest rates, whether or not the European Central Bank may be inclined still to increase interest rates given the uncertainty and the inflationary outlook,” said Ms Streeter.