Crude Drops 5% as Israel Agrees to Ceasefire Plan

Following Israel’s announcement on Tuesday that it had accepted US President Donald Trump’s proposal for a bilateral truce with Iran, oil prices fell more than 5%.

Asia’s stocks were rising as concerns about a shock to the energy market subsided after Israel and its arch-enemy fought a 12-day war. At the open, London, Paris, and Frankfurt also rose.

WTI, the primary US crude contract, was down 5.4 percent at $65.01 per barrel at approximately 0650 GMT on Tuesday, while Brent was down 5.2 percent at $67.75 per barrel.

Market participants have welcomed a possible resolution to the crisis, according to Lee Hardman of MUFG, who also pointed out that Brent “has now almost fully reversed all of the gains since the conflict started.”

The US dollar is reversing its recent advances in the foreign exchange market. The US dollar’s downward trend is more likely to continue if Middle East issues become less of a market mover.

The possibility that Iran would halt oil transportation through the vital Strait of Hormuz in retaliation for a US strike on its nuclear facilities over the weekend caused a short jump in crude prices on Monday morning.

However, when Iran claimed to have fired missiles at a significant US facility in Qatar, they fell as much as 7%, leaving oilfield assets untouched.

“War premium” Tehran kept a low profile. Stephen Innes of SPI Asset Management stated, “Their’retaliation’ struck a US base in Qatar — loud enough to make headlines, quiet enough not to shake the foundations of the oil market.”

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“And the war premium came crashing out of crude once that became clear.”

In a statement released on Tuesday, the Israeli government said that the war with Iran had “achieved all the objectives” and that “an immediate dual existential threat: nuclear and ballistic” had been eliminated.

According to the statement, “Israel will respond forcefully to any violation of the ceasefire.”

Shanghai completed the day up 1.2 percent, while Tokyo ended the day up 1.1 percent. On Tuesday afternoon, Hong Kong was up 2.1 percent.

Sydney ended the day up 1.0 percent, while Seoul jumped 3.0 percent, Taipei gained 2.1 percent, and Jakarta put on 1.3 percent.

After nearly going bankrupt more than four years ago, Virgin Australia made a spectacular recovery by reentering the local share market and seeing a substantial increase in value.

While Paris was up 1.5 percent and Frankfurt surged 1.8 percent, London gained 0.7 percent in early trading, with gains being limited as shares of oil majors Shell and BP dipped due to the decline in oil prices.

Following Federal Reserve Governor Michelle Bowman’s announcement that she would support lowering interest rates at the July meeting if inflation remained stable, the dollar lost gains in the foreign exchange markets.

Right now, the market anticipates that the Fed will start lowering interest rates again in September.

Bowman claimed that the currency was depreciating because “continuing progress in tariff negotiations providing a less risky economic environment to adjust policy.”

Important data at approximately 0700 GMT: Tokyo-Nikkei 225: UP 1.1% at 38,790.56 (close)

At 24,181.94, the Hong Kong-Hang Seng Index was up 2.1 percent.

Shanghai Composite: closed at 3,420.57, up 1.2%.

Euro/dollar: up from Monday’s $1.1581 to $1.1609

UP from $1.3526 to $1.3586 for the pound/dollar

Dollar/yen: down from 146.12 to 145.05

The euro/pound fell from 85.60 to 85.44 pence.

West Texas Intermediate: $65.01 per barrel, down 5.4%

At $67.75 a barrel, Brent North Sea Crude is down 5.2 percent.

The New York Dow closed at 42,581.78, up 0.9 percent.

FTSE 100 in London: up 0.7% at 8,816.78