Oil prices fell to around $94 on Thursday morning and Asian stocks climbed as optimism over a potential deal to end the Iran war and strong corporate earnings lifted markets across the region.
Brent crude opened 0.4 per cent lower at $94.55 a barrel after reports that Iran could consider allowing ships to sail freely through the Omani side of the Strait of Hormuz without risk of attack as part of proposals offered in negotiations with the United States.
It rose 0.3 per cent later to $95.23 a barrel as a major oil refinery fire in Australia raised supply concerns.
US West Texas Intermediate (WTI) crude futures were down 70 cents, or 0.8 per cent, at $90.59 a barrel.
Toshitaka Tazawa, an analyst at Fujitomi Securities, cautioned that while there were “hopes for de-escalation, many investors remain sceptical, given that US-Iran talks have repeatedly broken down even after appearing to make progress.”
“Until a peace deal is reached and free navigation through the strait is restored, WTI prices are expected to continue fluctuating between $80 and $100,” he told Reuters.
Asian stocks rallied, with strong corporate earnings also a key factor. Japan’s Nikkei reached a fresh record in early trading, up 2.2 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.9 per cent, putting it on track for a third consecutive day of gains. S&P 500 futures were also higher.
The gains followed a strong Wednesday session on Wall Street, where the S&P 500 rose 0.8 per cent and the Nasdaq gained 1.6 per cent after strong quarterly results from Bank of America and Morgan Stanley lifted both indexes to record highs. With around 6 per cent of companies having reported earnings, 84 per cent have beaten analyst expectations.
Chinese shares advanced 0.7 per cent after data showed the economy grew 5 per cent in the first quarter, beating analyst expectations.
The US dollar index was flat as geopolitical worries eased and traders brought forward expectations of monetary policy easing from the Federal Reserve. The euro edged up to within sight of its highest level since the war began at $1.1809, extending a nine-day winning streak. Gold slipped 0.6 per cent to $4,819.55.
Taiwan Semiconductor Manufacturing Company, a linchpin of the AI sector, is due to report quarterly earnings later on Thursday, with a 50 per cent surge in net profit expected on soaring demand for its advanced chips.
Markets also absorbed news that Donald Trump threatened to fire Federal Reserve chair Jerome Powell from his seat on the central bank’s board of governors if Mr Powell does not vacate the post when his term as Fed chief ends on 15 May, renewing concerns about the Fed’s independence.
The US-Israeli war with Iran has caused the largest-ever disruption to global oil and gas supplies, with Iran’s closure of the Strait of Hormuz cutting off a waterway that typically carries about 20 per cent of the world’s oil and liquefied natural gas flows.
Analysts at ING estimated that roughly 13 million barrels per day of oil flow had been disrupted by the closure, after accounting for pipeline diversions and the trickle of tankers that have passed through. With the US blockade on Iranian ports announced after the collapse of weekend peace talks, that disruption could increase further.
“The physical market is becoming tighter every day that passes without a restart of oil flows through the Strait of Hormuz,” ING analysts said.
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