Bullish sentiment returned to markets at the start of the week after hopes of an end to the Middle East war sent oil prices sliding.
The United States and Iran have halted strikes against each other as Oman attempts to facilitate an agreement to end the conflict and reopen the Strait of Hormuz.
The price of Brent crude is back down 9% to $88 a barrel having briefly brushed up against the $100 mark last week. WTI is 7.6% lower at $82.
As ever, equities are moving in the opposite direction, with futures prices indicating a significant jump in the main US indices when trading begins this afternoon.
The net buying is likely to receive further fuel from investors attempting to buy the dip in tech stocks that took place as the missiles and bombs were flying in the vicinity of Iran.
This side of the Atlantic, the FTSE 100 is up 0.4% to 10,779 points, while the Stoxx Europe 600 is up 0.8% to 649.
AJ Bell investment director Russ Mould, said: “A thumping drop in the price of oil, all the way back to [below] $90 a barrel, is helping get global stock markets off to a good start to the week, as the US and Iran pause hostilities once more amid efforts from Oman to broker a deal over the vexed issue of shipping passage through the Strait of Hormuz.
“Sentiment has received a further boost from a sizzling stockmarket debut in China by silicon chip maker CXMT. Its near five-fold surge may help to soothe concerns about the AI trade after slumps in SpaceX and Korea’s SK Hynix after their recent offerings.”
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Bryn Jones, head of fixed income at Rathbones Asset Management, added: “Big news overnight is the big fall in oil prices with potential ceasefire. Oil is now well below $100 dollars a barrel.
“Though refining margins are still at $30, so I can’t see this reducing pump prices in short term with double choke points in Strait of Hormuz and the Red Sea.
“Considering Iran’s nuclear program and negotiation chips have still not been removed, and I suspect some are still thinking that regime change is possible, the ceasefire lasting might take a leap of faith.
“Traffic through Hormuz remains a mess while the conflict has continued into the Red Sea, where Iran-backed Houthi forces allegedly launched attacks against Saudi energy infrastructure around Jizan and Yanbu over the weekend. This prompted retaliatory Saudi strikes.
“However, having said this, UST rallied overnight with some faith in the ceasefire.”
Susannah Streeter, chief investment strategist at Wealth Club, said: “Fresh talk of talks over Iran is raising hopes that this newly acute phase in the Middle East crisis could see some resolution.
“The FTSE 100 has set off on a confident run upwards in early trade, while futures markets indicate that Wall Street will also start on the front foot.
“The big confidence booster for investors at the start of the week remains signs of progress in the Middle East,” she continued.
“Early speculation that negotiations could resume has been reinforced by a second consecutive night without US strikes and by Tehran’s decision not to respond with further retaliatory action.
“While on the face of it the US administration is pushing the line that pressure is being maintained, markets remain cautious given the twists and turns during this conflict and the uncertainty over whether talks will actually come to fruition.”
