NEW YORK - Oil prices plunged on Wednesday while stocks rallied after the United States and Iran agreed to a two-week ceasefire that will see Tehran temporarily reopen the vital Strait of Hormuz.
With Donald Trump's deadline approaching for the Islamic republic to reopen the waterway or face obliteration, he announced a halt to attacks for two weeks and said he had received a "workable" 10-point proposal.
Iran later said it had agreed to safe passage in the Strait, through which a fifth of global oil and gas passes.
The news pushed down crude prices, with West Texas Intermediate losing almost 20 percent and Brent as much as 16 percent as investors heaved a huge sigh of relief after more than five weeks of war that has hammered supplies.
The euphoria sent equities rocketing on hopes the crisis that has shocked the global economy for more than a month will come to an end.
Seoul and Tokyo soared more than five percent, Taipei added nearly four percent, Sydney and Hong Kong more than two percent. Shanghai, Singapore and Wellington were also sharply higher.
Gold also rallied around five percent, having been hit by concerns of a sharp rise in inflation that will keep interest rates elevated. Bitcoin rose.
"Unsurprisingly, the initial market reaction has been a positive one, albeit perhaps not as sizeable as one might've expected, largely owing to the grind higher in risk assets seen since the tail end of Tuesday’s cash session," said Michael Brown at Pepperstone.
"Participants have been desperate for anything resembling good news for some weeks now, and even more desperate to see concrete steps being taken towards de-escalation.
"Now that we seem able to put a tick in both of those boxes, participants are unsurprisingly willing to significantly take up risk levels once more."
Stephen Innes of SPI Asset Management added that the deal "matters enormously for Asia", where several governments have been forced to introduce measures to combat rising energy costs.
"Lower oil prices remove the chokehold that has weighed on regional risk sentiment, especially in markets that feel imported energy shocks first and hardest," he said.
"With crude backing off, the pressure on inflation expectations and front-end yields eases at the margin, and that is enough to let capital rotate back toward risk, at least for now."