Markets cheer Iran deal, wait for oil to start flowing

June 15 (Reuters) – Stocks and bonds rallied and the dollar fell in Asia trade on Monday after the U.S. and Iran agreed a peace deal to re-open the Strait of Hormuz and lift a U.S. blockade on Iran.

U.S. crude futures fell more than 4%, S&P 500 futures rose about 0.8% and the dollar was down broadly, lifting the yen to 159.7 per dollar and the euro to $1.1616.[MKTS/GLOB]

Here are market analysts’ comments on the deal:

CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE:

“The peace framework is the clearest sign yet that both Washington and Iran want an off-ramp…but this is still a framework, not a final deal. The real test is Friday’s signing, the details around sanctions/nuclear concessions, and whether Israel actually respects Trump’s call to halt hostilities in Lebanon.”

HIROYUKI UENO, CHIEF STRATEGIST AT SUMITOMO MITSUI TRUST ASSET MANAGEMENT, TOKYO:

“The valuation for Japanese equities is still low but there is a caution for the Nikkei’s current level. The market was volatile last week and that was a sign of caution.

“So today’s gain is probably partly led by demand for short cover. There are some investors who must buy Japanese stocks today. But market players who are long on Japanese stocks would not scoop up the stocks at this high.”

MASAHITO SUGAWARA, SENIOR STRATEGIST AT DAIWA SECURITIES, TOKYO:

“Given the falling oil prices, the risk for accelerating inflation may weaken. Market players have been bracing for a hawkish stance from the BOJ, but the post-meeting comments from the BOJ’s Deputy Governor (Shinichi) Uchida may not be as hawkish as they had expected. That may weaken the yen after the press conference on Tuesday.”

IMRE SPEIZER, MARKET STRATEGIST, WESTPAC, AUCKLAND:

“It’s positive for risk assets, positive for risky currencies, negative for the U.S. dollar.

“There’s still a few minor concerns – the Israeli skirmish with Lebanon remains a risk. And then you’ve got the signing date’s Friday, and that’s a long way off in this sort of environment. If it all goes according to plan…there’ll probably be one more leg to this set of mini rallies.

“Inflation expectations might slip, but inflation itself is going to linger for some time. Because supply chains don’t suddenly get fixed, and oil back on tap is not immediate.”

BRIAN JACOBSEN, CHIEF ECONOMIC STRATEGIST, ANNEX WEALTH MANAGEMENT, WISCONSIN:

“For the Federal Reserve, this should make their life easier. Oil prices are falling, and gasoline prices should follow. Some will question whether this is a durable deal or not, but the Fed isn’t supposed to set monetary policy based on political speculation. At their upcoming meeting, they’ll likely remove their language about having an easing bias, but at least now they almost surely won’t include language with a hiking bias.”

JASON WONG, SENIOR MARKETS STRATEGIST, BNZ, WELLINGTON:

“This has been well anticipated, that’s why I think the market reaction can be pretty well contained. What you see on your screens today – we’re probably most of the way there now.

“It’s a good sign, hopefully we can put this behind us and focus on macro-economic forces…the market will assume things will gradually return to normal. It’s no longer a risk overhanging the market.”

NICK TWIDALE, CHIEF MARKET STRATEGIST, ATFX GLOBAL, SYDNEY:

“I think we’ll see the dollar fall over the course of the next few sessions. We’ll probably see some of the risk currencies like Aussie and yen appreciate a little bit. But I don’t think we’re going to see any huge moves.

“There’s going to be a lot of wait and see, on how quickly the Strait really reopens and how long it’s going to take for oil flow to really get back to normal. It’s certainly going to be months rather than weeks.

“I don’t think we’re going to see $70 oil too quickly.”

KRISTINA CLIFTON, SENIOR CURRENCY STRATEGIST, COMMONWEALTH BANK OF AUSTRALIA, SYDNEY:

“It’s obviously good news for the global economy that the Strait of Hormuz will reopen. It has been our view, though, that it’s going to take some time for oil and gas flows to restart in full. Markets will be focused on how traffic is returning…and seeing how quickly production can come back online.

“It is our view that energy prices are not going to go back down to the levels that they were pre-conflict for quite some time…and it’s going to take a while for traffic to go back to normal as well.”

MAHJABEEN ZAMAN, HEAD OF FX RESEARCH, ANZ, SYDNEY:

“This good news has been expected for some time now, and markets have been inching, waiting, with some of the positive vibe already embedded in pricing.

“Looking at cyclical FX, I think there is room for upside from where it is right now. You may see (oil) break $80 on just, you know, happy days today…but then maybe the market will realise that, oh, wait a minute, maybe the terms of the deal may not be as lucrative. We also think that oil prices will remain a little bit on the higher side only because infrastructure has been damaged.”

CHRIS WESTON, HEAD OF RESEARCH, PEPPERSTONE, MELBOURNE:

“It looks credible and it looks enough for the market to move on. We’re looking now at what Hormuz looks like in terms of the ramp-up of cargo and logistics through the channel, given there have been some structural changes (and) damage to refineries.

“I think there’s going to be a lot of other risk assets which are going to try to move on other factors such as the ramp-up of demand, people are looking at earnings again and central bank expectations this week.

“I think the trade is short volatility here. And that’s going to allow risk to come on…a further decline in long-end bond yields would be certainly quite welcome for equity risk.”

(Reporting by Tom Westbrook and Ankur Banerjee in Singapore and Junko Fujita in Tokyo; Editing by Jacqueline Wong, Kim Coghill and Shri Navaratnam)