US-Iran war as it happened: Trump agrees to two-week ceasefire subject to Strait of Hormuz reopening as US strikes military targets on Kharg Island

The Australian sharemarket has surged in an $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.

More countries have welcomed news of the US-Iran ceasefire.

New Zealand Foreign Affairs Minister Winston Peters said he welcomed “all efforts to bring to an end this conflict”.

“While this is encouraging news, there remains significant important work to be done in the coming days to secure a lasting ceasefire,” Peters said.

French President Emmanuel Macron said it was good news Iran would work on opening the Strait of Hormuz.

The German foreign minister said on X: “I welcome the decision by involved parties to agree to ceasefire in Iran conflict.”

The Saudi and Omani foreign ministries applauded the news of the ceasefire on X. Oman pledged to support efforts towards enduring security.

The head of a body representing global airlines warned it would take months for jet fuel supply to recover even if Iran reopened the Strait of Hormuz, given disruptions to Middle East refining capacity.

Fuel is the second-largest expense for air carriers after labour, typically accounting for about 27 per cent of operating expenses, according to the International Air Transport Association (IATA).

Iran’s closure of the Strait of Hormuz as part of retaliatory moves in the war has choked supplies of jet fuel globally and news of a ceasefire and the possibility of safe passage through Hormuz sent airline stocks soaring.

Willie Walsh, director general of IATA, told reporters in Singapore that while he expected crude oil prices to fall, jet fuel costs were likely to remain slightly elevated due to the impact on refineries, despite the strait seeming set to reopen.

“If it were to reopen and remain open, I think it will still take a period of months to get back to where supply needs to be given the disruption to the refining capacity in the Middle East,” Walsh said.

Reuters

Lebanon’s Hezbollah halted fire on northern Israel and on Israeli troops in Lebanon in the early hours after the US-Iran ceasefire was announced, three Lebanese sources close to the group told Reuters.

Israel has continued its strikes on southern Lebanon and issued a new evacuation order for one southern city, indicating it would strike there soon, after Israeli Prime Minister Benjamin Netanyahu said the two-week Iran-US ceasefire would not include Lebanon.

Iran-backed Hezbollah was expected to issue a statement outlining its formal position on the ceasefire and on Netanyahu’s assertion that Lebanon was not included, the three Lebanese sources said.

Reuters

Something interesting happened in oil markets in response to Donald Trump’s eleventh-hour announcement of a ceasefire in the hostilities in Iran. Oil prices immediately plunged, but the US price traded above that of global oil. In fact, since late last week, the West Texas Intermediate (WTI) price has traded at a premium to the price of Brent crude, the global benchmark.

That’s an inversion of the historical relationship, or at least the one that has held for more than a decade, in which Brent oil has usually traded at a $US3 ($4.25) to $US6-a-barrel premium over its WTI counterpart. The last time an inversion occurred was in May 2022, in response to Russia’s invasion of Ukraine.

Brent has generally been priced higher than US oil because it is the reference point for globally traded oil flowing from the North Sea, the Middle East and West Africa. It can be shipped and delivered anywhere, and therefore the pricing reflects its global reach, liquidity and seamless logistics.

US onshore oil is landlocked. It is piped to a hub at Cushing, Oklahoma, and, where Brent reflects global supply and demand balances and geopolitics, WTI prices are also driven by US domestic influences – production, demand and refining capacity.

So, why has the WTI price traded at a premium to Brent over the past week, a premium that was more than $US3 a barrel ahead of the announcement of the ceasefire?

Read the full analysis here.