ASX soars in $80 billion rally as investors cheer ceasefire

The Australian sharemarket has surged in a powerful $80 billion relief rally, as investors cheered a plunge in the oil price sparked by US President Donald Trump’s announcement of a two-week ceasefire and Iran’s move to allow ships to transit the Strait of Hormuz.

Markets around the region rose sharply on Wednesday and the Australian dollar strengthened above US70¢, as investors welcomed the prospect of lower oil prices, even though experts said the economic cost of the war remained uncertain.

After shooting up 2.8 per cent in early trade, the S&P/ASX 200 index closed 223.00 points or 2.6 per cent higher at 8951.8, adding about $80 billion in value.

Gold and silver jumped between 3 and 5 per cent as investors recalibrated their holdings and began looking beyond the crisis. The Australian dollar strengthened, and was trading at US70.56¢ shortly after 5pm.

The price of Brent Crude, the international standard, fell sharply, down more than 15 per cent soon after Trump posted a ceasefire announcement on Truth Social on Wednesday morning. Crude fell to around $US90 a barrel, its lowest level in four weeks, but was trading about $US93 in the afternoon.

The share rally and dive in oil followed a dramatic about-face by Trump, who backed down from his threat that a “whole civilisation will die tonight, never to be brought back again”, if Iran did not meet his deadline to reopen the Strait of Hormuz.

Iran has agreed to the two-week ceasefire, providing the attacks against it were halted, while CNN reported Israel was part of the agreement.

Lower oil prices could bring some relief to Australian motorists at the petrol pump if the ceasefire is sustained long enough for the flow of crude to increase substantially.

“The temporary ceasefire means the two sides are closer together, and that sparked a pretty sizeable relief rally in markets,” said Perpetual’s head of investment strategy Matt Sherwood.

“There’s probably going to be a short-lived rally as investors continue to close positions. But over time, what will be evident is that we are still living in a world of higher oil prices.”

Atlas Funds Management chief investment officer Hugh Dive said even though the market had rallied, he thought there remained a real possibility the ceasefire would not hold. “I don’t think this is the end of this particular conflict,” said Dive, whose fund is overweight on energy stocks.

Eight of the market’s 11 sectors rose, with tech stocks leading Wednesday’s upward charge. WiseTech soared 10.7 per cent, Xero was up 6.5 per cent, and TechnologyOne jumped 6.8 per cent.

Investors backed resource giants BHP (up 3 per cent) and Rio Tinto (up 4.3 per cent), but saved some of their exuberance for gold miners. Evolution Mining’s share spiked 10 per cent, and Northern Star Resources were up 7.1 per cent.

Out of favour was the energy sector. The fall in oil undercut Woodside, it fell 10.5 per cent, Santos, down 4.1 per cent, and Ampol, which slumped 3.9 per cent. Coal miner Yancoal plunged 9.2 per cent.

Overnight, US stocks swung sharply as uncertainty about the war with Iran increased ahead of the looming deadline.

The S&P 500 fell as much as 1.2 per cent after Trump’s threat. But stocks rallied at the end of trading after Pakistan’s prime minister urged Trump to extend his deadline for another two weeks and asked Iran to open up the strait for the same period.

The S&P 500 erased all its losses and ended with a modest gain of 0.1 per cent. The Dow Jones Industrial Average dipped 85 points, or 0.2 per cent, and the Nasdaq composite added 0.1 per cent.

They’re the latest swings to hit financial markets since late February because of deep uncertainty about when the fighting may end. During just the first hour of Tuesday’s trading, the Dow careened between a gain of 74 points and a loss of 425.

Oil prices have spiked because the war has snarled the production and transportation of crude in the Persian Gulf. Much of that oil exits the gulf through the Strait of Hormuz to reach customers around the world, but Iran has blocked it to enemies.

The worry in markets has been that a long-term disruption will keep oil prices high for a long time and send a painful wave of inflation crashing through the global economy.

So far in the war, Trump has made a series of threats to blow up Iranian power plants if it doesn’t open the Strait of Hormuz, only to delay it several times. A year ago, Trump ultimately backed off many of the stiff tariffs that he initially threatened to put on imports from other countries, though they ended up higher than from before his second term.

“Investors are likely to remain on edge and markets unable to establish trends, probably until there is a clear outcome later this evening: a deal, the US/Israeli strikes intensify, or Iran’s retaliation becomes escalatory instead of proportional,” according to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute.

With AP

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