Introduction: Oil Prices Increase and Asian Stocks Decline Amid Ceasefire Uncertainty
Good morning, and welcome to our ongoing coverage of business, financial markets, and the global economy.
Uncertainty surrounding the US-Iran ceasefire agreement has led to a rise in oil prices this morning.
Brent crude, the international benchmark for oil prices, increased by 2.1% to $96.77 per barrel, while New York light crude rose nearly 3% to $97.23 per barrel. This follows a drop of more than 10% in Brent crude yesterday after initial news of the ceasefire emerged.
Asian stock markets experienced volatility overnight: Japan’s Nikkei declined by 0.7%, and South Korea’s Kospi fell sharply by 2%. Both countries are significantly exposed to the Middle East conflict due to their reliance on oil and gas supplies from the region.
In China, the CSI300 index decreased by 0.5%, and Hong Kong’s Hang Seng slipped 0.2%.
Investor concerns persist regarding the "fragile" nature of the US-Iran ceasefire deal announced yesterday, as
"Those overnight losses follow several indications that the ceasefire isn’t holding quite as expected on Tuesday night. For instance, both the UAE and Kuwait said yesterday that their air defences had been intercepting drones from Iran. And on the Iranian side, their Parliament’s Speaker Ghalibaf said that three points of the ceasefire agreement had been violated.
Moreover, the IRGC warned of a “regret-inducing response” if Israel’s strikes against Lebanon didn’t stop immediately, whilst the Fars news agency said that the passage of oil tankers through the Strait of Hormuz was halted because of Israel’s continued strikes on Lebanon. So collectively, that’s raised concern about how durable this ceasefire will prove, particularly with it only being a two-week truce.”
Jim Reid, a strategist at Deutsche Bank, added that US President Donald Trump posted on social media a few hours ago that US forces would "remain in place, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with," and that if not, military action would be "stronger than anyone has ever seen before," with the US military "looking forward, actually, to its next Conquest." He also criticized NATO in a separate post overnight, stating they weren’t "there when we needed them," and referenced Greenland as a "big, poorly run, piece of ice." These remarks have raised concerns about a repeat of mid-January, when Trump's call for the US to acquire Greenland and threats of European tariffs triggered a risk-off move in global markets.
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Two Oil Tanker Charters Renewed at 47% Higher Rate, Reports UK Ship Investor
Tufton Assets, a UK fund investing in second-hand ships, has completed charter renewals on two oil tankers at a 47% higher rate.
The vessels, ranging from 30,000 to 40,000 deadweight tonnes and designed to transport refined petroleum products, had their charters extended by 12 months. The new rates are $20,738 per day net, up from the previous $14,072.
Nicolas Tirogalas, fund manager, stated that the rates were "agreed ahead of the recent escalation of tensions in the Middle East and reflect the strengthening of the product tanker market as a result of vessel shortages and Russian sanctions."
"A further eight vessels are due for charter renewals this year and we anticipate achieving higher daily rates on average, generating additional income for the company."
Despite these renewals, uncertainty remains in the shipping industry due to safety concerns around passage through the Strait of Hormuz.
Susannah Streeter, chief investment strategist at broker Wealth Club, commented that even if shipments resume in the Strait of Hormuz, risks will not "disappear overnight."
"Tankers may be forced to navigate mined waters and a heightened military presence, all of which will keep insurance premiums high and freight costs elevated."
The conflict is already impacting consumers financially, particularly motorists. Diesel prices have risen above £1.90 per litre, an increase of approximately 50p per litre in some UK areas since the war began. Petrol prices have also increased by around 30p per litre. Motorists traveling longer distances during the Easter holidays may face higher costs, with diesel reaching £2 per litre at some service stations.
If the ceasefire holds, prices may decrease slightly; however, the fragile situation suggests volatility will continue for weeks or months. Significant damage to key energy infrastructure in the Gulf region is expected to keep prices elevated until repairs are completed, which could take years for some facilities.
Some oil-producing countries, such as Saudi Arabia, have capacity to increase output gradually, depending on their ability to transport oil. With the Strait of Hormuz likely operating at a reduced capacity even if the ceasefire holds, it will take considerable time before price relief is seen at the pumps.
European Stock Markets Open Lower
European stock markets are following Asian markets lower this morning as optimism from yesterday’s rally diminishes.
The UK’s FTSE 100 index has declined 0.1% in early trading, Germany’s DAX dropped 0.6%, France’s CAC 40 is down 0.3%, and Italy’s FTSE MIB fell 0.2%.
The European Stoxx 600 index, tracking the continent’s largest companies, is down 0.1%.
Aarin Chiekrie, analyst at broker Hargreaves Lansdown, noted that US stock futures are also slightly lower this morning.
"While it’s been a tough start to the year for equity investors, the bigger picture needs to be kept in mind. The S&P 500 has already rallied more than 7% from its 30 March low and is now down less than 1% year-to-date. While progress towards a more permanent resolution in the Middle East will dominate short-term market moves, it’s earning power that drives stock prices in the long term. Some corners of the market have seen their share prices get caught up in the broader market sell-off, despite a resilient or improving earnings picture, so there’s something to be said for being greedy when others are fearful."
Brent crude prices recovered some of yesterday’s sharp losses this morning, rising nearly 2% to around $97 per barrel following further Israeli strikes on Lebanon. Oil prices are expected to remain elevated and volatile until a more permanent agreement is reached. US Vice President JD Vance is scheduled to lead a US delegation to Islamabad for direct talks with Iran this weekend.
UK Mortgage Market Wobbles Amid Middle East Conflict Uncertainty
Closer to home, the Middle East conflict is affecting confidence in the UK property market.
The Royal Institute of Chartered Surveyors (RICS) reported that rising mortgage costs have reduced buyer demand and are negatively impacting long-term house price expectations.
In March, a balance of 23% of professionals anticipated falling house prices rather than rising, and 39% observed a decline in new buyer inquiries. This is the weakest reading since August 2023.
Regions including London, East Anglia, the South East, and the South West showed weaker property price readings than the national average, while Scotland and Northern Ireland continued to report price increases.
Tarrant Parsons, head of market research and analysis at RICS, commented:
"The mood across the UK housing market has shifted markedly over the past couple of months. What had been a cautiously improving picture for activity has been knocked off course by the wider macro fallout from the Middle East conflict, as the renewed deterioration in the mortgage rate outlook has proved particularly challenging. Indeed, with average fixed rates climbing back above 5% according to some sources, it is unsurprising that buyer demand has softened. The path ahead hinges on whether or not recent surges in oil and energy costs begin to reverse in what remains a highly uncertain geopolitical environment."
Israel Instructs Energean to Reopen Natural Gas Platform
Possibly indicating expectations that the ceasefire will hold, the Israeli energy ministry has directed Energean to resume operations at its Karish natural gas platform, reported.
The platform, located off Israel’s Mediterranean coast, has been shut down for over a month since the outbreak of war with Iran.
Mohit Kumar, analyst at broker Jefferies, noted that the "fragile" ceasefire deal has begun to show signs of strain after Iran accused the US and Israel of violating terms due to attacks on Lebanon, but the agreement could still hold.
"Despite the fragile nature of the ceasefire, we believe that the truce will hold. Not because we believe that a solution has been found but because of the MAD (mutually assured destruction) principle. …US and Israel have realised that without a solution to cheap drone interceptors and someway to bypass the Strait of Hormuz, it’s a war that cannot be won. IRGC will be struggling with a destroyed economy which can pave the path for an uprising later. Hence, need time to consolidate their power particularly after a number of senior leaders have been killed. Given the interest of both parties, we believe that an uneasy truce will hold. But as argued yesterday, it’s an unstable equilibrium. The biggest losers of this arrangement have been the Gulf countries who would face an emboldened Iran. Iran’s ideology to export the Islamic Revolution would not bode well for the other gulf countries. Economically too, they have taken a setback with the path of projecting Middle East as an investment hub potentially delayed by a few years. Hence, we do not see oil going back to pre war levels. We also think that a geopolitical risk premium would need to be priced in different asset classes. From a market perspective, we have been in the low risk mode but with a positive bias. The positive view remains beyond the war, but we are not ready to sound all clear. Hence for investors who are long risk, we would recommend using yesterdays rally to take some profits which still keeping a positive risk bias. Market positioning is still small short to neutral and hence we would definitely not want to be short this market."
Below is the full text of President Trump’s post on his social media platform, Truth Social:
"All U.S. Ships, Aircraft, and Military Personnel, with additional Ammunition, Weaponry, and anything else that is appropriate and necessary for the lethal prosecution and destruction of an already substantially degraded Enemy, will remain in place in, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with. If for any reason it is not, which is highly unlikely, then the “Shootin’ Starts,” bigger, and better, and stronger than anyone has ever seen before. It was agreed, a long time ago, and despite all of the fake rhetoric to the contrary - NO NUCLEAR WEAPONS and, the Strait of Hormuz WILL BE OPEN & SAFE. In the meantime our great Military is Loading Up and Resting, looking forward, actually, to its next Conquest. AMERICA IS BACK!"
