Markets rallied strongly overnight after Donald Trump and Iran agreed on a two-week ceasefire, described by the US President as a “big day for world peace”.
In a textbook negotiation, both sides claimed victory, prompting the oil price to fall and equities to make strong gains, but with conditions on each side that could see the resumption of hostilities.
However, an easing of supplies could see the UK government harden its resistance to more North Sea oil drilling.
Brent crude was trading at $95.66 a barrel, well off recent peaks, though still higher than the $70 before the conflict began at the end of February.
Stock indexes in the Asia-Pacific region rose this morning. Japan’s Nikkei 225 gained by 5% while South Korea’s Kospi jumped by nearly 6%. Hong Kong’s Hang Seng while US stock market futures also pointed to a higher open for Wall Street and London equities are also expected to open higher.
Iran said it had agreed to reopen the Strait of Hormuz after Mr Trump accepted its 10-point plan as the basis for further talks which will begin on Friday.
Mr Trump said there was no question that the US had won a “total and complete victory”. This morning he posted on Truth Social to say it is a “big day for World Peace! Iran wants it to happen, they’ve had enough! Likewise, so has everyone else!”
He said the US will be “helping with the traffic buildup in the Strait of Hormuz” and promised investment in the region.
“There will be lots of positive action! Big money will be made. Iran can start the reconstruction process. We’ll be loading up with supplies of all kinds, and just “hangin’ around” in order to make sure that everything goes well. I feel confident that it will. Just like we are experiencing in the U.S., this could be the Golden Age of the Middle East!”
In an interview with Agence France Presse after his announcement, he said that Iran’s enriched uranium would be “perfectly taken care of” under the deal. “Or I wouldn’t have settled,” Trump said, suggesting the China had been influential in securing the agreement. Asked about the risk of conflict flaring up again, he replied: “You’re going to have to see.”
Israel said it supports Mr Trump’s decision to suspend strikes against Iran for two weeks “subject to Iran immediately opening the straits and stopping all attacks on the US, Israel and countries in the region.” However, Lebanon is not included in the deal, despite Pakistan and Iran saying it did.
Before the announcement of a ceasefire, there was increased pressure on the UK government to allow more drilling in the North Sea and to scrap the energy profits levy.
Rachel Reeves was minded to lift the levy in the Spring Statement but was deterred from doing so because of the tension in the Middle East.
She has been accused of blocking £17.5 billion of investment which would reduce the UK’s reliance on oil and gas imports.
However, the ceasefire may harden the government’s resistance to allowing more production amid suggestions that even the hardline Energy Secretary Ed Miliband will allow the Jackdaw gas field to go ahead.
Labour ministers have insisted that the crisis points to greater investment in fossil fuel alternatives.
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