Oil, Above $100, Briefly Drops Below $90 on Reports Middle East Ceasefire Is Near

Source

Korea Economic Daily

Summary

Reports that the Middle East war could soon end sent international oil prices and WTI futures down more than 10%%, with WTI falling from above $100 a barrel to $89.
Expectations for a ceasefire lifted US and European stocks and US semiconductor shares, while Nasdaq 100 futures and S&P 500 futures also moved higher.
After news of ceasefire talks, the dollar index, won-dollar exchange rate, and yen-dollar exchange rate fell, while gold futures prices briefly surged to $4,700 a troy ounce.

Forecast Trend Report by Period

Oil Drops Sharply on Reports a Ceasefire Deal Is Near

US and European Stocks Rise in Early Trading

International oil prices, which had climbed above $100 a barrel, plunged more than 10% in a matter of hours after reports said the US was close to ending the war in the Middle East. Global asset markets reacted across the board. US and European stocks rose, while major currencies including those in South Korea and Japan strengthened against the dollar.

West Texas Intermediate futures fell as low as $89 a barrel on May 6. The contract had traded above $100 before the ceasefire reports emerged. It then tumbled more than 10% after reports said an end to the fighting was near.

European stocks jumped shortly after the open. France’s CAC 40 rose 3.39%, the UK’s FTSE 100 gained 2.33%, and Germany’s DAX 40 added 2.27%. US stock futures also advanced before the open. As of 9 p.m., Nasdaq 100 futures were up 1.48% from the previous session and S&P 500 futures had gained 0.87%.

Improving risk appetite also sent US semiconductor shares sharply higher in premarket trading. AMD rose more than 16%, Super Micro Computer climbed 18%, and Arm Holdings gained more than 8%.

Major currencies also reacted. The dollar index had closed at 98.44 a day earlier, but fell to 97.62 as of 9 p.m. after news of ceasefire talks emerged. Asian currencies were especially quick to respond because many countries in the region depend heavily on Middle Eastern oil. In Seoul’s foreign-exchange market, the won closed about 7 won stronger at 1,455.10 per dollar. In night trading, it extended the gain and briefly touched 1,440. The yen also strengthened. Dollar-yen traded around 157 at 1 p.m., then briefly fell to 155 in night trading.

Gold, which had been falling after the Middle East war broke out, instead moved higher. After news of a possible ceasefire spread, gold futures briefly climbed to $4,700 a troy ounce on May 6. The contract had traded at $4,392.3 an ounce on April 26 and rose to around $4,650 on April 30 as the possibility of a ceasefire increased. Gold usually rises when uncertainty deepens because it is a haven asset. But after the war involving Iran began, it instead came under pressure. Concerns that a jump in oil and other prices would drive market interest rates sharply higher weighed on bullion.

Bae Tae-woong, Hankyung.com reporter, btu104@hankyung.com