Australian share market: ASX200 jumps on possible path to peace in Middle East

Australian investors have welcomed news of a possible path to peace that will end a month of bombings across the Middle East, sending the S&P-ASX200 sharply higher after Donald Trump declared the “war has been won”.

The index soared 1.3 per cent in the first 30 minutes of trade on Wednesday to 8485.6 points, later leaping to a 2.15 per cent gain by the half-way mark.

But buyers are expected to remain cautious after a similar surge on Tuesday fizzled throughout the day and left the bourse up just 0.3 per cent.

“While reports certainly suggest that peace talks are underway and progress is being made toward a ceasefire, the market remains firmly on edge, still needing concrete evidence that marine traffic is resuming unhindered through the Strait of Hormuz,” IG market analyst Tony Sycamore said.

“While the rhetoric around de-escalation and dialogue is clearly welcome, the market has thus far has treated it more with cautious optimism rather than unbridled joy.”

The price of oil fell overnight on reports of a US diplomatic push to end the war with Iran, which eclipsed news that more troops would be sent to the region.

West Texas Intermediate sank as much as 4.9 per cent to below $US88 a barrel after rising on Tuesday.

Israeli media said Washington was seeking a one-month ceasefire for talks. Separately, the New York Times reported the US sent Iran a 15-point plan to end the conflict, citing officials briefed on the move.

Earlier, President Donald Trump’s administration reportedly ordered the 82nd Airborne Division to deploy about 2000 soldiers to the region as the White House weighed options to ease Iran’s hold on the Strait of Hormuz, the vital waterway that’s a focus of the conflict.

Iran has said foreign ships are allowed to cross the waterway, as long as they aren’t supporting acts of aggression against the country and follow regulations put in place by Tehran.

Miners continued to lead the rebound from last week’s sell-off, which wiped more than $300 billion off the value of Australia’s 200 biggest listed companies since hostilities began at the end of last month.

The sector was up more than 4 per cent, with BHP adding more than 3 per cent and Rio Tinto 1.8 per cent. Fortescue rose 1.7 per cent in early trade but had dropped to just a 0.8 per cent gain by lunchtime.

Woodside Energy and Santos fell more than 3 per cent each as oil prices cooled.

“News headlines on the Middle East remain mixed with Iran and Israel showing no sign of a let-up, and while the US administration continues to talk about formal discussions with Iran,” said Westpac’s economics team.

Mixed reaction in US

Wall Street indexes lost ground overnight Tuesday in a volatile session as investors swayed between fears of rising oil prices and hopes for a resolution to the US-Israeli war on Iran as President Trump claimed progress in talks even as reports suggested that more American troops were headed to the Middle East.

Indexes regained some ground after Trump told reporters that the US was talking to “the right people” in Iran in order to reach an agreement to end hostilities and that Iran has agreed they will never have nuclear weapons.

But reports that the Pentagon is expected to send thousands of more troops from the elite 82nd Airborne Division to the Middle East caused some concerns that the war could drag on and keep oil prices high.

“Stocks are trying to find their footing as investors are keeping one eye on social media and the other eye on every headline. We’re very short-term oriented,” said Carol Schleif, chief market strategist, BMO Private Wealth.

More to come.