Oil rebounds as markets track Iran-Israel ceasefire

Oil prices recovered as stock markets diverged Wednesday while traders assessed whether the Israel-Iran ceasefire would endure, AFP reported.

The focus was also on a NATO summit that signed off on a sharp increase to military spending by the United States and its allies.

“Optimism about the fragile ceasefire holding between Iran and Israel has bubbled through markets… but more doubts are now creeping in about the truce holding,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Trade Nation analyst David Morrison said that “Investors are mindful that the current ceasefire may break down, although that seems like a small risk for now.”

Asian stock markets closed higher following rallies on Wall Street and in Europe on Tuesday on news of the ceasefire declared by Trump.

But European stocks closed lower on Wednesday, and Wall Street’s main indices were mixed in late morning trading.

The world’s main oil contract, Brent North Sea crude, rose 1.2 percent Wednesday after tumbling almost seven percent Tuesday.

Brent and the main US crude contract, WTI, had soared Monday in the first reaction to the US bombing of Iran.

Trump said Wednesday that the US strikes had resulted in the “total obliteration” of Iran’s nuclear capabilities, setting the country’s atomic programme back by “decades”.

“They’re not going to be building bombs for a long time,” he said, adding that the ceasefire between Israel and Iran was going “very well”.

But leaked US intelligence cast doubt on the damage caused by the American strikes, saying they had set back Tehran’s nuclear programme by just a few months.

Trade Nation’s Morrison said if those assessments are correct it would pose serious concerns for investors as “it opens up a myriad of possibilities” about how the situation could develop.

Trump’s comments were made in The Hague, where he mostly struck a conciliatory tone toward NATO allies, framing the deal on increased defence spending as a “great victory for everyone”.

Trump appeared keen to share the plaudits for the deal, which sees the 32 NATO countries commit to spending five percent of output on defence by 2035.

But Trump lashed out at Spain for its reluctance to boost defence spending and threaten to punish it with trade measures.

“They want a little bit of a free ride, but they’ll have to pay it back to us on trade, because I’m not going to let that happen. It’s unfair,” Trump told journalists at the end of NATO’s Hague summit.

While the Israel-Iran conflict has dominated global attention the outburst called attention to fact that Trump’s sweeping tariffs on friends and foes alike are set to come into force on July 9, after having been postponed once.

Dozens of countries are locked in negotiations with Washington to clinch some sort of trade deal to mitigate the impact of US tariffs.

Only Britain has been reached a deal, although Beijing and Washington have agreed to lower tariffs from the highest rates they imposed upon one another.