Oil prices fell and futures contracts on American stocks surged after President Donald Trump backed down from his threat to launch devastating attacks on Iran. American crude oil futures fell by over 15%.
Futures contracts on the S&P 500 index gained 2.2% at 8:05 p.m., while those on the Dow Jones rose by 930 points, or 2%.
Mr. Trump stated that Iran had proposed a 10-point peace plan that could help end the war initiated by the United States and Israel on February 28th.
The Iranian Foreign Minister announced Wednesday morning that ships would be allowed to pass through the Strait of Hormuz, the narrow entrance to the Persian Gulf, over the next two weeks under the coordination of the Iranian army.
It was not entirely clear if this meant that Iran would release its grip on this crucial waterway for global energy supply.
Abbas Araghchi wrote in a statement: “For two weeks, safe passage through the Strait of Hormuz will be possible thanks to coordination with the Iranian armed forces and taking into account technical constraints.”
American crude oil futures fell by 14.7% to $96.27 per barrel, while Brent, the international benchmark, dropped by 14.4% to $93.48. The price remains significantly higher than at the start of the war.
At the opening of Asian markets, the Japanese Nikkei rose by more than 4% and the South Korean Kospi gained 6%.
Earlier, American stocks had fluctuated significantly during the regular session, as uncertainty about the war with Iran increased after Donald Trump threatened that “an entire civilization would die tonight, never to be reborn” if Iran did not meet his ultimatum set for 8:00 p.m., Washington time, to open the Strait of Hormuz.
The S&P 500 dropped by 1.2%, but stocks rebounded at the end of the session after the Pakistani Prime Minister urged Trump to extend his deadline by two additional weeks and asked Iran to open the strait for the long term.
The S&P 500 erased all its losses and closed slightly up by 0.1%. The Dow Jones Industrial Average fell by 85 points, or 0.2%, and the Nasdaq Composite gained 0.1%.
These are the latest fluctuations that have shaken financial markets since late February due to deep uncertainty about the end of the fighting.
Oil prices have also been unstable. The price of the American crude oil barrel for delivery in May briefly surpassed $117 before settling at $112.95.
Oil prices soared as the war disrupted the production and transport of crude oil in the Persian Gulf. Much of this oil leaves the Gulf through the Strait of Hormuz to reach clients worldwide, but Iran has blocked it to its enemies.
Markets fear that a long-term disruption will keep oil prices high for a prolonged period and trigger a devastating wave of inflation that will hit the global economy.
The average price of a gallon of regular gasoline in the United States jumped to $4.14, according to AAA. It was below $3 a few days before the United States and Israel launched attacks to trigger the war in late February.
In the bond market, Treasury bond yields dropped upon the announcement of a potential ceasefire. The yield on the 10-year Treasury bond fell to 4.24%, down from 4.30% the previous Tuesday.
However, this level remains significantly higher than the 3.97% before the war, and this increase has led to a rise in mortgage rates and other credits extended to American households and businesses, slowing down the economy.
-With information from the Associated Press
