The Tamesis
Oil prices edged higher on Tuesday, while stocks were mostly lower in Asia as a U.S. military strike on Iran dashed hopes of an imminent deal to reopen the Strait of Hormuz.
Since a fragile ceasefire on April 8, the United States and Iran have been working towards a deal to end the war in the Middle East and reopen the vital waterway for oil tankers and cargo.
Stocks rose Monday on reports that crude oil prices fell below $100 a barrel. The deal could be announced in the coming days. But those hopes were dealt a blow when U.S. forces said they had struck missile sites in southern Iran and ships trying to mine mines.
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Brent North Sea crude, the international benchmark, rose more than 3% on Tuesday but remained below $100.
“The modest increase in oil prices underscores the market’s firm belief that the Strait of Hormuz will reopen,” said Arne Lohmann Rasmussen, commodities analyst at Global Risk Management.
“Traffic through the strait also appears to have increased,” he said, citing Iranian media reports.
Stocks were mostly lower but were higher in midday trading in London as traders returned from a long holiday weekend in the UK.
Russ Mold, investment director at AJ Bell, said: “The FTSE 100 is catching up with its European peers following progress on a potential deal between the United States and Iran.”
“However, continued doubts about the possibility of a deal and a pre-emptive US strike on Iran overnight meant any excitement was tempered,” he said.
Tehran wants to release frozen assets
The attack came as top Iranian negotiators arrived in Doha for another round of talks to end the conflict, now approaching its third month, and as the Israeli military stepped up hostilities against Iran-backed Hezbollah in southern Lebanon.
Iran did not immediately confirm the reported attack, but state media reported an explosion in the southern port city of Bandar Abbas, and the Revolutionary Guards said Iranian forces shot down a U.S. drone that entered its airspace and opened fire on an F-35 fighter jet.
Later, a maritime monitor said an oil tanker sailing near Oman on Tuesday was damaged by an explosion near the waterline.
UK Maritime Trade Operations said: “Although the master reported that some marine fuel had been discharged into the sea, the crew and vessel are safe.”
UKMTO added that the incident, which occurred in the Gulf of Oman about 60 nautical miles east of Muscat, was an “external explosion” but did not elaborate on the cause of the explosion.
Iran has been laying mines in nearby waters as part of an effort to block the Strait of Hormuz, which typically carries a fifth of global oil production.
“U.S. forces conducted self-defense strikes in southern Iran today to protect our forces from threats from Iranian forces,” U.S. Central Command spokesman Tim Hawkins said.
Despite the strike, Secretary of State Marco Rubio said on Tuesday that a deal was still possible.
“There were some negotiations today in Qatar, so we will see if we can make progress. I think there was a lot of back and forth discussion on the specific language in the initial document, so it will take a few days,” he told reporters during a visit to India.
Meanwhile, Tasnim news agency reported that Tehran negotiators were seeking to release frozen assets, half of which would be available immediately upon the signing of a preliminary memorandum of understanding.
The move comes as a senior Iranian delegation is in Qatar, where Tehran said it was finalizing a 14-point framework for a deal to end the war, which began with U.S. and Israeli airstrikes on February 28.
Tasnim quoted an unnamed source close to the negotiating team as saying that “Iran’s frozen assets will be unfrozen during the negotiation process, and the amount is estimated at $24 billion under the 14-point memorandum of understanding.”
Iran’s top negotiator, Speaker Mohammad Bagher Ghalibaf, arrived in Qatar on Monday to hold talks with Foreign Minister Abbas Araghchi and Central Bank Governor Abdel Nasser Hemati.
Tasnim said Ghalibaf’s trip was “aimed at reaching an understanding on how to implement Iran’s demands and how to obtain $12 billion in the first phase.”
Meanwhile, Iran’s vice president said the government had taken initial steps to restore the Internet following an almost complete blackout since war with the United States and Israel broke out in late February.
Vice President Mohammad Reza Aref said in a post on
Asian markets decline
On the corporate front, Seoul hit a new record high above 8,000 points as chipmakers, automakers and shipbuilders continued to outperform.
But most Asian markets fell, with the Nikkei down 0.25% from Monday’s high, Hong Kong’s Hang Seng Index flat, the Shanghai Composite Index down 0.2% and Mumbai’s BSE Sensex down 0.63%.
In Europe, investors were quick to express dismay at Ferrari’s launch of its first electric model, with the Italian luxury carmaker’s shares falling 6%.
Traders will be watching later this week for the Federal Reserve’s reaction to key consumer inflation data and its potential impact on interest rates.
Many economists warn that rising prices caused by the U.S.-Israeli war against Iran will limit the possibility of the Federal Reserve cutting interest rates to boost U.S. economic growth.
New Federal Reserve Chairman Kevin Warsh vowed to be “reform-oriented” when he was sworn in at the White House on Friday, while US President Donald Trump insisted that central bankers will be “totally independent”.
But Trump has exerted unprecedented pressure on the Fed to cut interest rates, sought to fire a Fed governor and his Justice Department to launch a criminal investigation into Warsh’s predecessor, Jerome Powell.
Key figures around GMT 1045
North Sea Brent crude: rose 2.1% to $95.36 a barrel.
TOKYO – Nikkei 225: down 0.3% to 64,996.09 (close).
Hong Kong – Hang Seng Index: unchanged at 25,599.45 (close).
Shanghai – Composite Index: fell 0.2% to 4,145.37 (closed).
LONDON – FTSE 100: up 0.7% to 10,538.59.
PARIS – CAC 40: down 0.9% to 8,181.89.
FRANKFURT – DAX: down 0.5% to 25,251.89.
USD/JPY: rose from 158.90 yen to 159.13.
- AFP With additional input and editing by Jim Pollard
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