Volkswacht Bodensee - Crude prices plunge, stocks surge as US and Iran agree ceasefire

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.

Trump had threatened Tuesday that if Hormuz was not reopened, "a whole civilization will die tonight, never to be brought back again". That came after he vowed to bomb bridges, power plants and other civilian infrastructure in Iran.

Iran warned it would deprive the United States and its allies of oil and gas "for years" if Washington crossed Tehran's "red lines".

However, as the world counted down to the cutoff, the president took to social media to say: "Subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz, I agree to suspend the bombing and attack of Iran for a period of two weeks."

He added that it "will be a double sided CEASEFIRE!" and that "we have already met and exceeded all Military objectives, and are very far along with a definitive Agreement concerning Longterm PEACE with Iran, and PEACE in the Middle East".

Prime Minister Shehbaz Sharif of Pakistan, which has played a key mediator role, said that the ceasefire would start immediately.

He said that the United States "along with their allies" had agreed to a ceasefire everywhere including Lebanon, implying that Israel had agreed to halt its invasion of its northern neighbour.

The decision also led to a sharp drop in the dollar, which had become the safe-haven while the war raged, with the yen, euro and pound all strengthening.

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."

- Key figures at around 0230 GMT -

West Texas Intermediate: DOWN 14.0 percent at $97.12 a barrel

Brent North Sea Crude: DOWN 13.2 percent at $94.86 a barrel

Tokyo - Nikkei 225: UP 5.3 percent at 56,270.90

Shanghai - Composite: UP UP 2.9 percent at 25,843.29

Hong Kong - Hang Seng Index: UP 1.5 percent at 3,946.47

Euro/dollar: UP at $1.1685 from $1.1585 on Tuesday

Pound/dollar: UP at $1.3413 from $1.3274

Dollar/yen: DOWN at 158.36 yen from 159.70 yen

Euro/pound: DOWN at 87.11 pence from 87.28 pence

New York - Dow: DOWN 0.2 percent at 46,584.46 (close)

London - FTSE 100: DOWN 0.8 percent at 10,348.79 (close)

R.Flueckiger--VB