Oil plunges below $US95 as the Wall Street surges as part of a worldwide stock markets rally

Oil prices plunged below $US95 per barrel and stock markets surged worldwide overnight after US President Donald Trump pulled back from his threat to destroy Iran.

On US markets, the S&P 500 leapt 2.5% after Trump announced a two-week ceasefire with Iran, less than 90 minutes before a deadline he had set for it to open the Strait of Hormuz and allow oil tankers to exit the Persian Gulf. The Dow Jones Industrial Average rallied 1,325 points, or 2.8%, and the Nasdaq composite soared 2.8% following even bigger gains in European and Asian stock markets.

Yet to match pre-Iran levels

US stock prices are still below where they were before the war. And oil prices are still higher because of the threat of a resumption to the war. The ceasefire already looks precarious, and Iran has closed the Strait of Hormuz again in response to Israeli attacks in Lebanon.

Such uncertainty caused some of the euphoria that fuelled financial markets in the morning to fade as trading progressed, and financial markets have been prone to sharp and sudden reversals since the war began.

So far in the war, Trump has set several deadlines for Iran to open the Strait of Hormuz, a main thoroughfare for oil to reach customers worldwide from the Persian Gulf, and has threatened big repercussions if Iran doesn't, only to delay them.

It's similar to a year ago, when Trump threatened stiff tariffs on imports from other countries on "Liberation Day." After a couple of delays, his administration eventually negotiated lower tariffs with many countries, though still higher than from before his second term. That led some investors to allege Trump "always chickens out," or "TACO," if financial markets show enough pain.

Oil prices plunge, but Hormuz still jammed

The price for a barrel of benchmark US crude oil plunged 16.4% to settle at $US94.41 after almost dropping to $US91 earlier in the morning.

Brent crude, the international standard, tumbled 13.3% to $US94.75 per barrel. It had briefly topped $US119 when worries about the war with Iran were at their highest, but it's still above its roughly $US70 price from before the war.

The next moves for oil prices will depend on how many oil tankers can start exiting the Strait of Hormuz and how easy their passage is. Despite claims from the White House about an uptick in ships transiting the strait, independent analysts say they have seen no change in traffic through it.

Windward, a maritime intelligence firm that tracks international shipping, said all ships transiting the strait must still coordinate safe passage with Iranian authorities, who are requiring hefty tolls of up to $US1 a barrel for outbound oil, paid in cryptocurrency. The largest supertankers carry up to 3 million barrels of crude.

White House press secretary Karoline Leavitt said the closing of the strait reported in Iranian state media was "completely unacceptable." She repeated Trump's "expectation and demand" that the channel be reopened.

Asian markets surge

In Asia, where countries are more reliant on oil from the Middle East, South Korea's Kospi stock index surged 6.9%,. Japan's Nikkei 225 leaped 5.4%, and Hong Kong's Hang Seng jumped 3.1%.

Australian shares had their best day in a year on Wednesday, with the S&P/ASX200 jumping 2.5% .

European stock indexes rose nearly as much. Germany's DAX returned 5.1%, and France's CAC 40 rallied 4.5%.

On Wall Street overnight, companies with big fuel bills rallied to trim some of the sharp losses taken on worries about oil prices staying high.

All told, the S&P 500 rose 165.96 points to 6,782.81. The Dow Jones Industrial Average jumped 1,325.46 to 47,909.92, and the Nasdaq composite rallied 617.15 to 22,635.00.

The Associated Press