Aussie dollar up, oil tanks on news of US-Iran ceasefire

The Australian share market has come bursting out of the blocks on Wednesday to broad gains as a potential two-week ceasefire between the US, Israel and Iran takes the sting out of oil prices.

In the first hour of trading, the ASX200 is up 2.6 per cent, with tech and material stocks the largest gainers.

Global oil prices are tumbling as the vital Strait of Hormuz shipping lane could be open soon during a two-week ceasefire; Australian energy stocks are plummeting, with Woodside and Viva Energy losing 10 per cent in the first hour, Santos sliding 5.6 per cent and Ampol down 4.25 per cent.

About 20 per cent of the world’s oil trade flowing again has cast optimism upon airlines; Qantas shares are up 9 per cent in early trading, and Virgin has gained 13 per cent.

Oil prices have fallen as much as 19 per cent following the announcement of a two-week ceasefire which should open the key trading route.

The Aussie dollar has gained 1.5 per cent against the USD to US70.70c, and spot gold prices have risen 2.3 per cent.

Financial markets hanging on Donald Trump’s threatening deadline for Iran, which passed at 10am AEST, found sweet relief in news of the US suspending attacks on Iran, analyst Stephen Innes said.

“Once the White House stepped back from the brink and replaced imminent escalation with a conditional two-week ceasefire, oil stopped acting as a lever of global fear and began to revert to something closer to flow and balance,” Mr Innes said in a note.

“That matters enormously for Asia. Lower oil prices remove the chokehold that has weighed on regional risk sentiment, especially in markets that feel imported energy shocks first and hardest.”

Asian markets on Wednesday were nervously awaiting the deadline, Mr Innes said.

“The market walked into Asia like a spring wound too tight, every asset calibrated to a single moment on the clock,” he said.

“It walks out of the open with that tension released, not resolved, but eased just enough to let air back into the system.

“The two week ceasefire buys time, and in markets, time is oxygen.”

Australia is highly dependent on Singapore, Malaysian and Korean oil refineries for fuel, and many Asian nations purchase large amounts of Australian natural gas.

Wednesday morning Australian time, Donald Trump announced the US had agreed to a two-week ceasefire with Iran, brokered by Pakistan, with direct talks to be held in Pakistan on Friday.

Iran’s foreign minister says it will allow tankers to transit the Strait of Hormuz for the next two weeks, under Iranian military management.