European stock markets hit record high and oil price falls to three-month low after US-Iran peace deal – business live

Time to wrap up….

Global oil prices have tumbled to a three-month low and stock markets rallied amid fresh hopes that a US-Iran peace deal could end the greatest energy supply crisis in the history of the market.

The price of Brent crude dropped 5% to below $83 (£62) a barrel as the new trading week began, amid optimism that the strait of Hormuz could reopen shortly and bring a return of Gulf oil exports to the market. Wholesale gas prices fell 6% in Europe.

Stock markets on Wall Street rallied, with the Dow Jones industrial average rising by 1% to hit a new record high as investors welcomed the news that Washington and Tehran had reached the preliminary agreement. The Russell 2000 index of small US companies also hit a new high, rising by 1.5%.

Trump said on Sunday that a deal was “now completeâ€, despite recent Israeli airstrikes on Beirut that had threatened to undermine the sensitive talks.

The US president wrote on social media:

“I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!â€

An hour later he clarified that the strait would open after the peace deal was signed on Friday and that “for purposes of mine removal, oil will flow on both ends again for the Region, and the World!â€

More here:

Experts are warning, though, that a return to pre-crisis normality is months away and relies on the cooperation of the Iranian regime with the White House.

And in other news:

Britain's stock market has missed out on today's relief rally.

Although miners, industrial stocks and financial firms rallied, the wider FTSE 100 share index has closed 41 points lower at 10,430 points, down 0.4% today.

Defence firm BAE Systems led the fallers, down 4.7%, amid hopes of a sustained end to hostilities in the Middle East, followed by oil and gas producer Shell (-4.3%).

Analysts at ABN Amro have concerns about the US-Iran deal.

They point out that it ‘takes three to TACO', explaining:

The Hormuz closure is not just a matter for the US and Iran, and one of our main concerns continues to be that Israel is not part of the deal, despite it being a crucial actor in developments. Events just this weekend illustrate how fragile the deal is likely to be.

Also challenging is what comes after the 60 day truce extension, ABN Amro add:

Many sticking points need to be resolved between the US and Iran, such as the length of any moratorium on uranium enrichment, the costs of reconstruction in Iran (potentially tied to Iran's demands for sanctions relief and the release of frozen foreign assets), and the fact that it still wishes to levy tolls on the Strait of Hormuz (together with Oman)

It would be no surprise if the Strait were to be closed again or a low level conflict were to resume if talks do not go well, or if Israel resumes its offensive in Lebanon.

The International Monetary Fund has declared it is still on ‘high alert' for economic damage caused by the Iran war.

In a blog post published this afternoon, IMF managing director Kristalina Georgieva writes that the global economy “appears to be holding upâ€, more than three months after the Iran war started

She says there are not yet signs of a global slowdown, with “strong economic momentum†in the US and China.

But, Georgieva warns, there are also significant disparities; some countries and communities have been harder hit. And in Africa, the negative impacts are more conspicuous.

She writes:

That the global economy is so far weathering the shock is cause for reassurance—but not complacency.

The IMF remains on high alert.

Shares in Fox are also sliding, as Wall Street digests its $22bn takeover of streaming service Roku.

Fox Corporation is leading the fallers on the S&P 500, down around 16%.

The FT reckons investors are spooked at the cost of this aggressive bet on the future of streaming live sports and news…

While many US stocks are rallying, energy producers' shares are sliding.

Chevron (-3.15%) are leading the fallers on the Dow Jones Industrial average, while Exxon Mobile are down 3.7%.

That tracks the fall in the US oil price, below $80 a barrel earlier today.

Back in the UK, engineering firm Rolls-Royce has secured two important agreements involving its new small nuclear reactors.

Swedish nuclear development company Videberg Kraft has chosen Rolls-Royce to supply three Small Modular Reactors (SMRs) on the Värö peninsula, on Sweden's west coast.

Videberg Kraft say:

The Videberg Project will build Sweden's first new nuclear power plant in more than 40 years. It will significantly strengthen the Swedish energy system by adding 1,500 MWe of clean baseload capacity – around 6 percent of Sweden's annual power consumption – for more than 60 years, supporting industries and households in southern Sweden while enhancing energy security.

This comes a day after the UK and Japan agreed to co-operate on advanced nuclear technologies, under which Rolls-Royce will work with the United Kingdom National Nuclear Laboratory (UKNNL) and Japan Atomic Energy Agency (JAEA), to “accelerate the introduction of advanced nuclear technologies in the UK.â€

Boom! The US Dow Jones industrial average has hit a record high in early trading, as Wall Street jumps.

Relief over the US-Iran peace deal has pushed the index of 30 large US companies to a new peak of 51,857 points, over the previous record peak set in early June.

Aerospace manufacturer Boeing (+4%) is leading the risers, followed by construction equipment maker Caterpillar (+3.6%), and Amazon (+3.3%)

The Russell 2000 index of small US companies has also hit a record high, up 1.5%. This follows gains in European markets, which hit their own record high this morning.

“Peace optimism†is helping Wall Street to rally, says Neil Wilson, Saxo UK investor strategist, who explains:

Stocks soared and oil prices slid after the US and Iran agreed a peace deal to reopen the Strait of Hormuz.

“Ships of the World, start your engines. Let the oil flow!†President Trump posted. Iran confirmed the text of a memorandum of understanding had been finalised and said the war would end “permanently and immediately on all frontsâ€.

The two countries will sign the deal in a few days, in Switzerland, after the G7 leaders conference in France this week. The deal is seeing investors take some geopolitical risk premia off the table.

SpaceX's shares are rallying on its second day as a listed company.

After jumping 19% on Friday, SpaceX are up another 5.5% in early trading, as excitement over the company's entry onto the stock market lingers.

This pushes its valuation further over $2trn, and confirms Elon Musk's status as a trillionaire, even though SpaceX is loss-making, and floated at a hefty valuation of 92 times last year's revenues.

Wall Street's main indexes have jumped at the start of trading, as New York traders welcome the news that Washington and Tehran reached a preliminary agreement to end the Middle East conflict and reopen the Strait of Hormuz.

The Dow Jones Industrial Average has climbed by 642 points, or 1.25%, to 51,844 points.

The broader S&P 500 is up 1.5%, while the Nasdaq Composite has climbed by 2.25%.

Deutsche Bank's George Saravelos has identified four currencies that should benefit once super-tankers start moving through the Strait of Hormuz full of oil again.

• Swedish krona: It is high beta to the euro, an energy importer, and pro-cyclical to global growth. The domestic economy has been outperforming most economies in Europe and yet the currency has been one of the weakest in developed markets since March.

• South African rand: An unwind in oil risk premia, potential rebound in gold, high real-rate buffer and still-improving domestic backdrop should all help.

• Chilean peso: The currency has been one of the biggest under-performers versus its aggregate terms of trade and positioning is short. With oil receding and copper remaining elevated, the balance of payments should materially improve.

• Indian rupee: High sensitivity to oil prices and a market that is positioned short. RBI policy measures will support both near-term inflows and longer-term structural demand.

The disruption to fertiliser supplies caused by the Iran war may not be reversed quickly, expert warn.

The Middle East is a key supplier of nitrogen-based fertilisers such as urea, and shortages since the conflict began have pushed up food prices.

But the bad news for farmers (and ultimately consumers) is that fertilizer cargoes are unlikely to be among the first shipments to move.

Alexis Ellender, senior dry bulk lead at Kpler, says (via Bloomberg):

“When it comes to moving ships through the Strait of Hormuz, it's going to be oil tankers and LNG carriers that are top of the list once we get towards a more normal flow of traffic.

“Fertilizer is not as high a priority.â€

Here's our news story on the drop in the oil price today:

European gas prices have dropped sharply today, on hopes that supplies from the Middle East will resume soon.

Despite warnings that it will take time for traffic through the strait of Hormuz to resume, wholesale gas prices have dropped to their lowest in over a month.

The month-ahead UK gas contract is down 7% at 103.9p per therm, its lowest level since 7 May, as traders react to the US-Iran peace deal.

The continental gas price has dropped by 6.4%, to €43.785 per megawatt hour.

That will make it cheaper for governments to rebuilt their liquified natural gas (LNG) reserves ahead of next winter.

Analysts at ING say:

Europe still needs to replenish its gas storage, which sits well below the seasonal average – at a time when Asia will increasingly compete with Europe for LNG supplies.