Oil slides, stocks climb on Trump’s Iran reprieve

NEW YORK — Global stocks rebounded from a four-month low on Monday after US President Donald Trump announced he would order the military to postpone any strikes against Iranian power plants and energy infrastructure, easing fears over the repercussions of a deeper oil shock.

The comments came hours ahead of a deadline that threatened further escalation in the conflict, now in its fourth week.

Trump added in a post on his Truth Social platform that the US and Iran had had "VERY GOOD AND PRODUCTIVE" conversations over the past two days about a "COMPLETE AND TOTAL RESOLUTION OF HOSTILITIES IN THE MIDDLE EAST."

Oil prices tumbled by more than 8%, the dollar fell against other major currencies and government borrowing costs also eased.

"The market woke up to some potentially good news out of the Middle East on Monday. But follow-through on any relief rally will likely require tangible follow-through on the geopolitical front," said Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley.

Iranian media contradict Trump's comments

Trump said the postponement followed productive conversations with Iran.

But Iran's Tasnim news agency, citing an Iranian official, said that the Strait of Hormuz would not return to pre-war conditions and energy markets would remain unsettled, adding that no negotiations with the US were under way.

US crude ell 8.58% to $89.80 a barrel and Brent fell to $101.89 per barrel, down 9.14% on the day.

Government bond yields, which had risen ahead of Trump's comments on expectations for central bank rate hikes in Europe, moved lower.

The Dow Jones Industrial Average rose 1,021.70 points, or 2.24%, to 46,599.17, the S&P 500 rose 136.26 points, or 2.09%, to 6,642.74 and the Nasdaq Composite rose 493.02 points, or 2.28%, to 22,140.63.

MSCI's gauge of stocks across the globe rose 13.03 points, or 1.31%, to 994.34. The pan-European STOXX 600 index rose 1.87%.

Investors trim rate hike expectations

Britain's 2-year bond yield, which has borne the brunt of a bond selloff since the start of the conflict, was last down 21 basis points on the day at 4.359%, having risen 13 bps earlier. The 10-year yield dropped from its highest since 2008.

Investors trimmed their bets on Bank of England rate hikes, now pricing in two hikes by year-end versus more than three earlier on Monday, while they also cut expectations for the European Central Bank.

In the US, two-year and 10-year Treasury yields were 5 to 6 basis points lower, with the 10-year yield last at 4.344%.

The dollar was broadly soft, having traded higher against most other currencies until the headline hit.

The euro was last up 0.4% at $1.1616.

"It’s clearly jawboning in the face of the meltdown that we've seen. We're seeing a bit of a knee-jerk reaction to this positive news," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman.

"There's certainly room for a bit of an unwind in the fear trade. A more sustained rally in risk assets will depend on whether this is legit de-escalation or simply a pause before a next leg up in escalation." — Reuters