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INSTANT VIEW: Investor reactions to Trump's agreement to a two-week ceasefire.

INSTANT VIEW: Investor reactions to Trump's agreement to a two-week ceasefire.
INSTANT VIEW: Investor reactions to Trump's agreement to a two-week ceasefire.

The U.S. president Donald Trump announced on Tuesday that the two-week ceasefire agreement with Iran was reached less than two hours prior to his deadline of Tehran reopening the Strait of Hormuz, or facing widespread attacks against its civilian infrastructure.

Oil fell, bonds rose and stocks surged as the ceasefire seemed to pave the way for lasting peace and the resumption Gulf oil and natural gas exports.

Here are some comments from analysts and investors:

SAUL KAVONIC HEAD OF ENERGY RESEARCH MST MARQUEE SYDNEY

This is a way out of Trump's bombastic ultimatum but it does not mean that the oil market or war will be over. The oil and LNG shut down is unlikely to resume until there's more confidence that a ceasefire will last.

A two-week ceasefire could allow some LNG and oil tankers to be released from the Strait of Hormuz, easing some of the market pressure in May. It does not lead to more production but rather a release of water storage.

Even if there is a peace agreement, the market would be between 3 million to 5 million barrels per day tighter in the coming years than pre-war expectations due to the damage done to the oil and oil products export infrastructure, which will take months, if not years, to repair.

SHINGO IDE, CHIEF EQUALITY STRATEGIST, NLI RESEARCH INSITUTE, TOKYO

"This was not a unilateral statement from Trump or the U.S. Pakistan's role as a mediator lends it credibility.

"I believe there is a growing hope that if the situation continues in this manner beyond these two weeks, then it could transition to a real truce.

"That being said, the United States is still far behind Iran in their thinking... and what Israel is aiming at is on a completely different level. "I think that there is still much to do before these three parties reach an agreement they can all accept."

KYLE RODDA, SENIOR MARKET ANALYST, CAPITAL.COM, MELBOURNE:

This is the Grande TACO that the markets were looking for. This is a significant development that could be a turning point in the markets. In this world, things can swing violently based on another headline. The re-opening is huge. Oil prices are likely to have reached their peak. This crisis will have ripple effects. We've likely seen the?peak of escalation, and volatility."

PRASHANT NEWNAHA SENIOR RATE STRATEGIST TD SECURITIES SINGAPORE

"A new escalation is not ruled out. But the markets treat this ceasefire like it's the real thing, and all parties will market the ceasefire to the public as a huge win. As the worst case scenario has been avoided, risk assets and bonds are expected to rally.

Looking further ahead, oil prices will not return to their pre-war level. This will make the persistence of inflation a major theme for markets. It is likely that this will put a halt at some point to the current rally in rates.

RAY ATTRILL HEAD OF FOREX STRATEGY NATIONAL AUSTRALIA BANK SYDNEY

"A lot needs to happen in the next 14-days. The markets still need to proceed with the degree of scepticism Iran fully accepts, leaving them vulnerable to a retracement.

I don't believe anyone will be betting on a final resolution to the Middle East issue, and there will be concern about the amount the oil price will drop. We know that it will take months to repair the damage. "$90 is very different from an oil price between $75 and 85."

CHARU CHANANA CHIEF INVESTMENT STRATEGIST SAXO SINGAPORE

This is a de-escalation sign for the markets, particularly with Hormuz's reopening. It reduces the immediate shock of oil and supports risk sentiment.

The key question is whether the talks continue to progress during this two week window. Also, will energy flows and shipping activity return to normal? And, finally, will insurers and tanker owners regain sufficient confidence that Hormuz can function again smoothly? This will determine if this is just a relief rally, or if it looks more like a de-escalation lasting."

JAMIE COX MANAGING PARTNER HARRIS FINANCIAL GROUPS, RICHMOND VIRGINIA

Markets predicted that Trump would be looking for a way out of Iran. He got one today and he took it.

The markets have risen over the past week as a result of a rise in the number of tough talks, which is usually followed by the inevitable twist in order to reach a settlement.

BESA DEDA CHIEF ECONOMIST WILLIAM BUCK SYDNEY

Markets are likely to show cautious optimism, since this is the first meaningful truce since hostilities started. Investors will be aware that the ceasefire may not last. It is hoped that this will happen, thus limiting the risks of a more profound economic impact.

Even if the ceasefire leads to a final resolution, it will take some time to repair and restore infrastructure and refineries. It's better than the prolonged impact.

ANDREW LILLEY IS THE CHIEF RATES STRATEGIST, BARRENJOEY SYDNEY.

"We have a long way to go to get back where we were before this began. Now, the market is unsure about the extent to the which oil prices will return to $75.

"This little precipice, where oil is flowing and no one is in shortage, but it remains at a price equilibrium of $90 is where you eliminate the tail risk, which central banks are cutting.

It's a scenario that will result in permanent high yields, because we'll have damaged infrastructure for months and a high oil price that is going to stick around. This means we're going get higher inflation."

GEORGE BOUBOURAS, HEAD OF RESEARCH, K2 ?ASSET MANAGEMENT, MELBOURNE:

Restocking the energy supply is key in the coming week, as the conflict could re-ignite quickly. It is less likely that a recession will occur, especially if oil, gas and fertiliser are available in the coming week. The markets are never complacent and always pragmatic as they look through the conflict. Valuations remain compelling from a 1-year perspective."

MARTIN WHETTON HEAD OF FINANCIAL MARKETS STRATEGY WESTPAC SYDNEY

"This happens every day." Does it mean that people will take on new risks? It doesn't.

"There would need to be a real lasting peace (to change the situation). The people aren't taking any risks. "This is just algos doing things."

BRIAN JACOBSEN CHIEF ECONOMIST ANNEX WEALTH MANAGEMENT MENOMONEE FALLS WISCONSIN

"President Trump stated that he had agreed to a ceasefire of two weeks. This is enough to maintain hope that an entire civilization will not be destroyed and oil could start flowing through Strait of Hormuz.

Is it simply a matter of moving the goalposts, TACO Tuesday or any other metaphor that we choose, only for tempers to flare up and bombs to drop again? Who knows? "But it's good for now, to elicit positive responses from the markets." Reporting by Tom Westbrook in Singapore, Ankur Banerjee in Tokyo, Gregor Stuart Hunter in Singapore, and Tony Munroe and Ankur Banerjee in Singapore; editing by Sumeet Chaterjee

(source: Reuters)