Oil Steadies on Hopes for Hormuz Reopening as Risk Appetite Lifts Stocks

Oil prices steadied and sentiment across global equity markets improved after the US and Iran agreed to reopen the Strait of Hormuz.

Bloomberg reported on June 15 that West Texas Intermediate traded near $81 a barrel, little changed after a sharp drop the previous day. Brent crude was also near $83 a barrel. Oil had posted its biggest decline in two weeks after news of the agreement between Washington and Tehran.

Investors are betting that normalized traffic through the Strait of Hormuz will ease concerns over crude supply and help reduce inflation pressure.

President Donald Trump, speaking at a meeting with French President Emmanuel Macron, said the strait was already partially open and would be fully reopened on June 19.

Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management, called the US-Iran agreement a very positive breakthrough for markets. He said it should help ease the uncertainty and volatility that persisted during the negotiations.

Still, key issues remain unresolved, including how Iran's nuclear materials will be handled, leaving room for short-term volatility.

Ulrike Hoffmann-Burchardi, chief investment officer at UBS, said short-term volatility could persist as markets assess how the agreement is carried out and whether it proves sustainable. Even so, solid economic growth and corporate earnings should continue to support gains in equities.

US stocks rallied as risk appetite recovered. The S&P 500 closed up 1.7%, while the Nasdaq 100 gained 3.1%.

Lower oil prices have also eased inflation concerns, reducing the likelihood of another Federal Reserve interest-rate increase. Markets are now focused on the Federal Open Market Committee decision due on June 18.