Oil prices tumbled and global stocks rallied on Wednesday after reports that Washington had sent a peace proposal to Iran, while Tehran signalled it would allow “non-hostile” vessels to pass through the crucial Strait of Hormuz.
After nearly four weeks of conflict, investors seized on early signs of possible de-escalation, although analysts cautioned that risks remain, particularly with reports of additional US troop deployments to the Middle East.
Both major crude benchmarks dropped sharply, at one point falling more than six percent with Brent briefly slipping below $100 per barrel after US President Donald Trump said Washington was “in negotiations right now” with Tehran. Prices later recovered some losses as trading progressed.
Speaking at the Oval Office, Trump struck an optimistic tone, saying Iran had made a significant gesture.
“Iran did something yesterday that was amazing… a very big present,” he said, adding, “It showed we are dealing with the right people.”
While he did not elaborate, Trump indicated the development was linked to the Strait of Hormuz, a strategic chokepoint through which roughly one-fifth of global oil and gas supplies pass. Iran had earlier disrupted traffic through the strait, fuelling fears of supply shocks and rising inflation.
Media reports suggested Washington had sent a multi-point peace proposal via Pakistan, including a potential ceasefire and discussions around Iran’s nuclear programme.
Markets react
Tehran also moved to ease tensions, assuring safe passage for “non-hostile” vessels through the Strait of Hormuz in a message relayed by the International Maritime Organization.
The developments boosted investor sentiment across Asia, with major markets in Tokyo, Shanghai, Hong Kong, Sydney, and Mumbai all posting gains.
Additional support came from International Energy Agency chief Fatih Birol, who said the agency stood ready to release more oil reserves “if and when necessary” to stabilise markets.
However, analysts warned against premature optimism.
“Developments on the ground do not fully support a de-escalation narrative,” said Chris Weston of Pepperstone, noting reports that up to 3,000 US troops could be deployed to the region.
Economic strain mounts
The global economic impact of the conflict is becoming increasingly evident, with governments taking steps to curb energy consumption and manage rising costs.
Several countries have already introduced emergency measures. Vietnam has more than doubled diesel prices since the conflict began, while the Philippines declared a “national energy emergency” over supply risks. Sri Lanka has ordered reductions in public lighting, Bangladesh has sharply increased jet fuel prices, and Ireland has cut fuel taxes to cushion consumers from rising costs.
Meanwhile, fresh data showed slowing business activity in the eurozone as rising energy costs and supply chain disruptions continue to weigh on growth.
Key figures at around 0700 GMT
- West Texas Intermediate: DOWN 3.1 percent at $89.46 a barrel
- Brent North Sea Crude: DOWN 3.8 percent at $100.54 a barrel
- Tokyo – Nikkei 225: UP 2.9 percent at 53,749.62 (close)
- Hong Kong – Hang Seng Index: UP 0.5 percent at 25,199.45
- Shanghai – Composite: UP 1.3 percent at 3,931.84 (close)
- Euro/dollar: UP at $1.1600 from $1.1583 on Tuesday
- Pound/dollar: UP at $1.3395 from $1.3381
- Dollar/yen: DOWN at 159.00 yen from 159.03 yen
- Euro/pound: UP at 86.62 pence from 86.57 pence
- New York – Dow: DOWN 0.2 percent at 46,124.06 (close)
- London – FTSE 100: UP 0.7 percent at 9,965.16 (close)
AFP
