Key facts
- A provisional 60-day ceasefire extension between the US and Iran has been signed.
- The deal aims to reopen the Strait of Hormuz, leading to market surges and lower oil/gas prices.
- The agreement includes a 60-day negotiation period for toll-free passage through the Strait of Hormuz.
- The preliminary accord defers difficult issues like Iran's nuclear program.
- Asian stock markets, including Japan's Nikkei and South Korea's KOSPI, reached record highs.
- Benchmark U.S. crude futures fell 2.7% to $74.70 a barrel, and Brent fell 2.3% to $77.70 per barrel.
Major Asian stock gauges hit record highs and oil prices fell further after the U.S. and Iranian presidents signed an interim peace deal. Japan's Nikkei share average rose to an intraday record high for a fourth straight session, surging past 71,000, while South Korea's benchmark KOSPI index reached a record 9,000.68. Both found support from solid gains in semiconductor and AI-related shares. Taiwan's stocks also rose to an intraday high, touching 46,565.70. MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.2% higher.
Benchmark U.S. crude futures prices dropped 2.7% to $74.70 a barrel and Brent fell 2.3% to $77.70 per barrel, a three-month low. The market action came after the U.S. and Iran released the text of their agreement, which extends a ceasefire announced in April by another 60 days to allow the two sides to negotiate a truce. It also includes the full resumption of maritime traffic 'with no charge' in the Strait of Hormuz.
The interim deal would mark a significant step toward normalising crude supply and prices, but Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, cautioned uncertainties remained. U.S. President Donald Trump threatened to resume attacks and kill Iranian officials if they failed to honour their commitments. 'The current toll-free transit period is limited to 60 days, and the future framework remains uncertain, leaving lingering concerns,' Maruyama said in a market note.
U.S. stock futures edged higher in Asian trading hours, with S&P 500 E-minis up 0.7%, Nasdaq 100 E-minis rising 1% and Dow E-minis advancing 0.5%. In contrast, early European trades were mostly down. The pan-region Euro Stoxx 50 futures lost 0.7%, German DAX futures were down 0.4% and FTSE futures shed 0.6%.
The yield on benchmark U.S. 10-year notes fell 1.76 basis points (bps) to 4.445% from late Wednesday levels. The yield on the 2-year note, which typically moves in step with Federal Reserve interest rate expectations, fell 0.12 bps to 4.162%. The benchmark 10-year Japanese government bond yield rose 0.5 bp to 2.605%.
The Bank of England meets later on Thursday and is expected to copy the Federal Reserve in leaving rates unchanged, putting the focus on the tone of policymakers' commentary. The dollar weakened 0.02% against the yen to 160.59 after touching 160.79 overnight, its highest level since July 2024. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was little changed at 100.23, clinging to a more than two-month high. The euro was up 0.2% at $1.1524.
Recent declines in oil prices have begun to ease worries about an economic slowdown, especially in energy-importing Europe. The International Energy Agency said on Wednesday the oil market would move into a significant supply surplus in 2027 after recovering from the closure of the Strait of Hormuz. Spot gold rose 1.32% to $4,314.09 an ounce. In cryptocurrencies, bitcoin fell 0.93% to $63,776.04. Ethereum declined 1% to $1,728.00.