Comments on the reopening of the Strait of Hormuz

Commenting on the reopening of the Strait of Hormuz, Neil Wilson, Saxo UK Investor Strategist says: 

“That’s a massive shot in the arm for risk sentiment: Iran says the Strait of Hormuz is open to all commercial shipping during the Israel-Lebanon ceasefire…a good chance for fomoop (fear of missing out on peace) trades to ratchet up into the weekend, though watch for what the US says and consider even if Iran says it’s open, how many will get through?

Also, risk remains for shooting to start again…nevertheless as I said before it’s less about the actual route being taken and all the various stops on the way, and more about the direction of travel – so markets are happy to roll on with this latest development being viewed as a considerable easing of tensions. Rotation is in play again – now watch airlines/travel/luxury for the pickup.

Iran’s Foreign Minister, Abbas Araghchi, confirmed the Strait of Hormuz is open for all commercial ships, sending oil prices sharply lower – Brent (continuous contract) tumbled about 10% from just shy of $100 a barrel to just under $90, hitting support at the 50-day simple moving average for the time being. Dutch TTF gas fell by a similar margin to €39 and is now back to near where it opened after the war started at €38 (was near €32 before it all kicked off).
The comments injected fresh risk-on buying into equity markets with the DAX, CAC ad Stoxx 50 +2% higher and Dow Jones futures +500pts and our USA500 index trading north of 7,100 with Spoos up roughly 1% ahead of the open. Looks like it will be a risk-on finish to this strong week for global equities. The FTSE 100 is lagging, gaining around +0.5%, with oil majors Shell and BP acting as considerable drags on the index, with the index heavyweights both off around 4-5% on the move in crude markets. Airline shares took off with IAG +6%, EasyJet +7%…this is a considerable boost for the airlines – potential for jet fuel shortages to ease if ships can get through. SSE and Centrica are still down sharply on comments from the Chancellor about changing energy pricing mechanisms.
Meanwhile, the dollar slipped as traders further unwound safe haven positioning that had supported the greenback. Bonds are also catching a bid with the UK 2yr gilt down below 4.1% now, which should start to feed into easier financing conditions. That has helped push sterling to fresh war highs, with cable touching 1.36 for its best since the middle of February. Watch if pressure mounts on PM Starmer over the weekend however…”
 

Nikos Tzabouras, Senior Market Analyst at Tradu, commented:

 
“Oil prices slump as Iran reopens the Strait of Hormuz, fuelling optimism for a lasting US-Iran agreement that would normalise flows. At the same time, the earlier price spike has already raised demand destruction risks, leaving crude exposed to deeper declines.

“Nonetheless, the US blockade remains in place and a deal with Tehran is still elusive. Even with the Strait fully open, supply will not be restored overnight. The process is likely to be lengthy and complex, which could keep oil prices elevated.”

Reopening of Strait eases worries for markets

 
Axel Rudolph, Chief Technical Analyst at IG: “The reopening of the Strait of Hormuz, even on a temporary basis, has come as a huge sigh of relief to global markets, easing immediate fears around energy supply disruption with the oil price instantly dropping more than 10% and providing a degree of stability to shipping routes. However, the conditional nature of the move, tied to the duration of the Lebanon ceasefire, means this is far from a permanent resolution. Investors will remain wary of how quickly tensions could resurface, and for now this looks more like a pause in volatility rather than a definitive turning point.”

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