Global oil prices fell sharply today after reports suggested Iranian crude returned to international markets under a potential US-Iran agreement. The decline boosted hopes of lower inflation and pushed government bond yields lower across major economies. On Tuesday and Wednesday, several Iranian oil tankers passed through the Strait of Hormuz as the US Navy lifted blockade.
Brent crude futures fell below $80 per barrel, reaching their lowest level since the beginning of the US-Iran conflict in March. Market sentiment improved after a senior US official said Washington would waive sanctions on Iranian oil as part of a peace agreement expected to be signed on Friday.
The prospect of millions of additional barrels entering global markets increased expectations of stronger supply. Consequently, investors anticipated lower energy costs and easing inflationary pressures.
Meanwhile, bond yields declined as traders responded to the fall in oil prices. The yield on Japan’s 10-year government bond dropped 1.5 basis points to 2.63 percent. Australia’s 10-year bond yield also declined nearly five basis points to 4.787 percent.
However, uncertainty remained because only limited details of the proposed US-Iran agreement have been made public. In addition, the three-month disruption in the Strait of Hormuz has significantly reduced global oil inventories, while US crude reserves remain at their lowest level since 1983.
On Wall Street, investors shifted away from technology and semiconductor stocks. As a result, the Nasdaq Composite fell 1.15 percent. In contrast, gains in financial and industrial shares helped the Dow Jones Industrial Average reach a record high.
Asian stock markets traded cautiously ahead of the Federal Reserve’s policy decision. Japan’s Nikkei gained 0.4 percent, while markets in Hong Kong and Shanghai remained largely unchanged. Technology-focused markets in Taiwan and South Korea edged lower.
Investors are now closely watching Federal Reserve Chair Kevin Warsh’s first policy meeting. Although markets expect interest rates to remain unchanged, traders will focus on his remarks and future policy guidance. Analysts said any indication of future rate cuts or hikes could significantly influence global financial markets and the direction of the US dollar.
