Oil tumbles 10% as Iran declares strait of Hormuz ‘completely open’
The oil price is tumbling, after Iran announced that the strait of Hormuz is now open.
Crude oil has plunged by 10% on hopes that energy supplies could resume after weeks of disruption.
Iran’s foreign minister, Abbas Araghchi, posted on social media that the waterway is ‘completely open’, following the ceasefire agreed between Israel and Lebanon overnight.
double quotation markIn line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire.
Araghchi added that vessels must travel on the “coordinated route” previously announced by Iran’s Ports and Maritime Organisation.
Brent crude has plunged below $90 a barrel, a 10% fall.
Although that account, on X, isn’t verified, president Trump has also announced that Iran has reopened the strait.
Posting on Truth Social, he says:
double quotation markIRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE. THANK YOU!
Optimism was already building in the markets after Axios reported that the US. and Iran are negotiating over “a three-page plan to end the war”.
One element under discussion being that the U.S. would release $20bn in frozen Iranian funds in return for Iran giving up its stockpile of enriched uranium, Axios reported.
Updated at 09.17 EDT
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President Donald Trump has now told Reuters that the US will enter Iran at a “leisurely pace” to recover its enriched uranium and bring it back to the US.
ShareUS stock market up 2%
Donald Trump has now claimed that the strait of Hormuz will not be closed by Iran again, posting:
double quotation markIran has agreed to never close the Strait of Hormuz again. It will no longer be used as a weapon against the World! President DONALD J. TRUMP.
The US market is bouncing higher, with the Dow Jones industrial average up 2%, or 965 points, at 49,543 points.
Updated at 11.48 EDT
London stock market closes higher
The UK’s FTSE 100 has closed at its highest level since early in the Iran war.
The blue-chip share index has ended the day 0.7% higher, up 77 points at 10,667.
That’s its highest close since 2 March, despite being dragged back by oil companies and electricity producers.
Precious metals miner Fresnillo ended the day as the top riser, up 6.5%, followed by airline group IAG (+6.2%) and copper miner Antofagasta (+5.3%).
The smaller FTSE 250 index posted a stronger rally – up almost 1.9%.
The process of returning to normal in the strait of Hormuz will probably take some times, explains Paul Diggle, chief economist at Aberdeen Investments:
double quotation mark“Further progress is being made in the US-Iran ceasefire, with announcements today about the strait of Hormuz re-opening.
That said, the normalisation of traffic is likely to be gradual, with plenty of uncertainties around maritime safety and whether Iran needs to give permission to individual ships, seemingly remaining.
So our economic forecasts incorporate a slight worsening in the global growth-inflation trade-off this year, relative to the pre-war outlook.
Updated at 11.27 EDT
UK government bond prices are rallying as investors welcome the reopening of the strait of Hormuz.
This is pushing down the yield, or interest rate, on the debt.
Ten-year bond yields are down 9 basis points (0.09 of a percentage point) at 4.75%, while shorter-dated two-year bond yields are down 11bps at 4.1%.
That indicates that the cost of government borrowing has come down, as the City’s fears of an inflation surge from the Iran war ease.
Share“A huge sigh of relief to global markets”
The London stock mrket is higher too – with the FTSE 100 up 66 point, or 0.6%, at 10,655 points.
Axel Rudolph, chief technical analyst at IG:
double quotation mark“The reopening of the Strait of Hormuz, even on a temporary basis, has come as a huge sigh of relief to global markets, easing immediate fears around energy supply disruption with the oil price instantly dropping more than 10% and providing a degree of stability to shipping routes.
However, the conditional nature of the move, tied to the duration of the Lebanon ceasefire, means this is far from a permanent resolution. Investors will remain wary of how quickly tensions could resurface, and for now this looks more like a pause in volatility rather than a definitive turning point.”
Expectations that the Bank of England might raise interest rates more than once this year are fading.
The money markets are now only indicating around 23 basis points of increases to Bank rate by the end of this year, meaning one quarter-point rate rise is no longer fully priced in.
Earlier this week, the markets were indicating around 35bps of rises – meaning one rise was fully priced in, with the possibility of a second.
European stock markets are ripping higher.
Germany’s DAX and France’s CAC 40 have both jumped by around 2%.
Neil Wilson, Saxo UK investor strategist says the markets have received “a massive shot in the arm for risk sentiment”:
double quotation markIran says the Strait of Hormuz is open to all commercial shipping during the Israel-Lebanon ceasefire…a good chance for fomoop (fear of missing out on peace) trades to ratchet up into the weekend, though watch for what the US says and consider even if Iran says it’s open, how many will get through?
Also, risk remains for shooting to start again…nevertheless as I said before it’s less about the actual route being taken and all the various stops on the way, and more about the direction of travel – so markets are happy to roll on with this latest development being viewed as a considerable easing of tensions. Rotation is in play again – now watch airlines/travel/luxury for the pickup.
A senior Iranian official has told Reuters that transit through the strait of Hormuz will be through ‘designated safe lanes’ which Iran deems safe for maritime navigation.
ShareUK gas prices down
UK gas prices have slumped too, on hopes of a pick-up in deliveries from the Gulf now Iran has announced the strait of Hormuz is open.
The month-ahead UK gas contract is down almost 8% at 98p per therm.
That’s still higher than before the conflict began, when it was below 80p a therm. But it’s also rather lower than the highs of 180p seen in March.
Updated at 09.48 EDT
US stock market jumps at the open
Wall Street has hailed Iran’s announcement that the strait of Hormuz is fully open.
Stocks have opened higher in New York, with the Dow Jones industrial average jumping by 578 points, or 1.2%, to 49,157 points.
The broader S&P 500 index is up 0.7%.
ShareTrump: the naval blockade remains in full force
The US is not, yet, lifting its own blockade on Iranian ports.
Donald Trump has posted on Truth Social that it will remain in place until a peace deal (or ‘transaction’, as he calls it) is complete.
The US president says:
double quotation markTHE STRAIT OF HORMUZ IS COMPLETELY OPEN AND READY FOR BUSINESS AND FULL PASSAGE, BUT THE NAVAL BLOCKADE WILL REMAIN IN FULL FORCE AND EFFECT AS IT PERTAINS TO IRAN, ONLY, UNTIL SUCH TIME AS OUR TRANSACTION WITH IRAN IS 100% COMPLETE. THIS PROCESS SHOULD GO VERY QUICKLY IN THAT MOST OF THE POINTS ARE ALREADY NEGOTIATED. THANK YOU FOR YOUR ATTENTION TO THIS MATTER! PRESIDENT DONALD J.TRUMP
Oil company shares are slumping, as the reopening of the strait of Hormuz threatens to end their earnings boost from the war.
BP (-6.7%) and Shell (-5%) are among the top fallers in London.
ShareAirline shares jump
Shares in airlines are soaring after Iran announced the strait of Hormuz was ‘completely open’.
IAG, the parent company of British Airways, has jumped 6%, to the top of the FTSE 100 leaderboard.
Rolls-Royce, which makes and services jet engines, are up 5.5%.
Among smaller stocks, Wizz Air are up 10% and easyJet has jumped by 8.2%.