Global stock markets posted strong gains on Wednesday as oil prices fell sharply amid renewed hopes for a resolution to the Middle East conflict.
Market expert Jack Ablin from Cresset Wealth Advisors told French news agency AFP that the day saw a slight easing of tensions related to the conflict in the region.
Earlier on Wednesday, Iran's government announced that it was considering a new US peace proposal facilitated by Pakistan.
Decline in oil prices
For his part, US President Donald Trump said he was “in no rush” to finalise an agreement, which he indicated was in its “final phase.”
The remarks triggered a decline in oil prices.
Brent crude fell 5.63% to $105.02 per barrel, while West Texas Intermediate slipped 5.66%, landing at $98.26 per barrel.
The downward trend in energy prices began earlier when a South Korean oil tanker navigated the Strait of Hormuz with assistance from Iran, according to Seoul.
Bond yields decline
“If a deal is struck, market operators expect the Strait of Hormuz to reopen, allowing more barrels to flow back into the market,” explained Andy Lipow of Lipow Oil Associates.
Prior to the war, about 20% of the world’s crude oil and liquefied natural gas passed through the narrow waterway, which is now nearly blocked.
The drop in oil prices was felt on bond markets, where yields saw declines.
As of 20:30 GMT, the yield on 10-year US Treasury notes fell to 4.58% from 4.67% on Tuesday, an unusual movement. The 30-year bond yield also edged lower, dropping from 5.18% to 5.12%.
Analysts remain cautious
In Europe, German 10-year Bund yields fell from 3.19% to 3.08%, while French 10-year bond yields dropped from just under 3.83% to 3.71%.
Despite the optimism, Ablin expressed caution, noting that investors remain wary as peace negotiations have been ongoing for two months with no significant breakthroughs.
Bond yields remain elevated compared to pre-conflict levels, and even the figures from just a few days ago are comparatively lower.
Daniela Hathorn, senior market analyst at Capital.com, noted that, historically, markets struggle to maintain high valuations in an environment of rapidly rising borrowing costs.
Global stock markets rally
Nevertheless, stock markets benefited from the lower debt costs.
In the US, the Dow Jones rose 1.31%, the tech-heavy Nasdaq climbed 1.54%, and the S&P 500 gained 1.08%.
European shares mirrored the rally, with Paris gaining 1.70%, Frankfurt rising 1.38%, London climbing 0.99%, and Milan advancing 1.71%.
