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Thanks for following our coverage of the latest on the reopening of the Strait of Hormuz.
A quick look at markets shows oil has hit a fresh three-month low of $80.89, a drop of 2.7pc on the day after a 4.8pc decline on Monday.
The FTSE 100 has risen 0.6pc, while the domestically focused FTSE 250 has fallen 0.1pc.
Wall Street stocks are on track to open higher at the opening bell later, helped by the continued appetite for SpaceX. It has climbed another 8pc in premarket trading.
We will have any fresh developments here.
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In today’s To Business newsletter, our industry editor Matt Oliver argued that Britain can respond to being barred from Anthropic software in one of two ways.
It could either make itself indispensible in America by developing expertise in niche areas such as insurance, quantum computing, photonics or AI-assisted life sciences.
Or it can eschew American and Chinese models and use open-source models that are already available to develop our own parallel software.
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Banks predict interest rates to stay on hold despite US-Iran deal
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Major banks are predicting the US Federal Reserve will keep interest rates on hold for the rest of this year despite Donald Trump’s deal with Iran.
UBS Global Wealth Management pushed back its timeline for US rate cuts from December and March to March and June next year.
It said it expects policymakers to set a “hawkish” tone, meaning they are more in favour of tighter monetary policy.
Meanwhile, Bank of America said it expects the Fed to signal it will ramin on hold this year with its so-called “dot plot”.
The chart indicates the direction which policymakers think rates will go.
The Fed’s policy decision is due on Wednesday and will be the first under new chair Kevin Warsh. Policymakers are widely expected to keep rates steady.
UBS Global Wealth Management told clients: “Despite the new Fed chair’s previously stated more dovish views, we expect a more hawkish tone to the Fed’s meeting, both in the central bank’s statement and in the dot plot.”
Borrowing costs fall ahead of rate decision
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The cost of government borrowing has edged lower as the prospect of the Strait of Hormuz reopening eased potential inflation pressure from higher oil prices.
The yield on 10-year gilts, as UK bonds are known, fell from 4.81pc to 4.78pc as traders also wait to see what happens at the next interest rate decisions by the US Federal Reserve and the Bank of England.
Bond yields would likely fall further – lowering borrowing costs – if either central bank signals that it thinks the current lower oil prices will ease inflation pressures consistently.
Pound edges higher over hopes for Hormuz
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The pound edged up as the tentative US-Iran deal stopped investors piling into the dollar.
Sterling was up 0.1pc to $1.342 against the US currency, which is seen as a safe haven in times of turmoil.
Donald Trump has promised the Strait of Hormuz will be fully reopen by Friday following the agreement, which has sent the price of oil down a further 2.3pc towards $81 a barrel, a fresh three-month low.
ING analysts said: “A more durable repricing requires safe, predictable and insured shipping through the Strait of Hormuz.
“And demand could likely be higher than usual as depleted reserves need to be replenished. Re-escalation risks are reduced, but not off the table.”
The next key events for currency markets will be the interest rate decisions by the US Federal Reserve and Bank of England this week.
The Fed meeting will be the first led by new chair Kevin Warsh and will be closely watched for his comments on inflation.
Britain’s energy supplies face disruption from Norway strike action
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Not the news you want to hear in the middle of an energy crisis.
A strike by Norwegian oil-industry workers is threatening to disrupt energy supplies to Britain.
Our international economics editor Hans van Leeuwen has the details.
Goldman Sachs slashes oil price forecast after Trump’s Iran deal
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One of Wall Street’s biggest banks has reduced its forecast for oil prices after the US agreed to a path to end its war with Iran.
Goldman Sachs said it expects oil prices to average $80 a barrel in the fourth quarter of this year, down from its previous prediction of $90.
The bank also cut its 2027 average from $80 to $75 in the wake of the interim deal announced by Donald Trump, which will lift the US blockade in the Gulf and reopen the Strait of Hormuz from Friday.
Analyst Daan Struyven said: “While full details on the agreement are unclear, we now assume that Persian Gulf exports normalise to pre-war levels by the end of July (vs. end of August previously).”
European shares rise as inflation fears ease
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European shares inched up as the excitement died down over the preliminary agreement between the US and Iran.
The pan-European Stoxx 600 index edged 0.2pc higher after closing at a record high on Monday.
Oil prices extended declines, with Brent crude trading below $82 a barrel, easing some concerns over inflation.
The Dax in Germany and Cac 40 in France were each up 0.4pc.
The US Federal Reserve and the Bank of England are expected to keep interest rates on hold this week as they wait to see how the situation with the Strait of Hormuz pans out.
The European Central Bank raised rates last week from 2pc to 2.25pc. Earlier today, the Bank of Japan raised borrowing costs to a 31-year high of 1pc.
UN agency developing workaround for Iran tolls
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The head of the UN agency that overseas global shipping suggested the body is developing a workaround that could allow Iran to charge for use of the Strait of Hormuz without enforcing illegal tolls.
Arsenio Dominguez, secretary general of the International Maritime Organisation, said it was working out how it could “increase support” from “heavy users” of the waterway.
“There is no ways to actually introduce tolls or fees of straits for navigation,” he told BBC Radio 4’s Today programme.
“What we are working on is mechanisms that can assist the countries and bring parties from the region and heavy users of the strait into what assistance may be needed to coordinate and increase the support for aids for navigation, protection of the environment etc.
“We have such mechanisms in other parts of the world for straits for international navigation but without introducing any tolls.
“That’s the kind of mechanisms we will be looking for to coordinate and establish if agreed.”
He added it would take weeks for the strait to be reopened following the US-Iran deal, with shipping needing to be carefully coordinated to avoid mines.
He said: “If we take into account that before the conflict, it was on average 130 vessels a day that were transiting the Strait of Hormuz, we have over 500 vessels that are still stuck in the region. We need to coordinate it because we don’t want to exacerbate the situation and start having collisions.
“One of the main decisions was to start organising an evacuation corridor, first to evacuate the vessels that are there, and then, step by step, to start resuming trade both in and out of the strait.”
Qatar gears up for Strait of Hormuz reopening
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Qatar is planning to rapidly ramp up production of liquefied natural gas (LNG) once the Strait of Hormuz reopens despite damage to its major facilities.
Qatar Energy has told buyers it expects output to reach around 50pc of capacity within a month of shipping being restored, rising to 80pc within two months, according to Bloomberg.
The remaining capacity will take years to restore after its Ras Laffan site suffered “extensive” damage from Iranian attacks in March.
It shut the world’s largest LNG plant in the first week of the war and it has remained largely idle since then.
FTSE 100 inches up at open
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UK stocks edged higher at the open as oil and gas markets steadied following the US-Iran peace deal.
The FTSE 100 rose 0.2pc to 10,447.65 a day after its energy and defence stocks were hit hard by the prospect of an end to the Middle East conflict.
US vice president JD Vance has admitted several issues remain in the US-Iran peace deal.
The midcap FTSE 250 rose 0.1pc to 23,391.56.
Gas prices edge up despite Trump promises
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The price of European wholesale gas edged higher despite Donald Trump insisting the Strait of Hormuz will be fully reopened on Friday.
Dutch TTF, the Continent’s benchmark, was up 0.8pc to €42 per megawatt hour as traders waited for details of the US-Iran deal.
It had dropped 9pc on Monday but halted its decline even as the US president said shipping had already began to resume through the strait.
JD Vance admitted that several issues remained in the Iran peace deal ahead of G7 discussions on the Middle East.
The US vice president said the agreement was “very general” and “about a page and a half”, but added that Mr Trump could release the deal before Friday.
Stephen Innes of SPI Asset Management said: “The US-Iran framework gave investors permission to take some air out of the energy risk balloon, but it has not yet delivered the one thing markets always demand after the first sigh of relief: proof.
“Flows through Hormuz still need to normalize, inventories still need to be rebuilt, shipping lanes still need to regain confidence, and the formal signing is still sitting out there on June 19 like a checkpoint the market has not crossed.
“That means the rally can keep some peace dividend in the price, but it cannot fully spend the cheque until the physical market confirms the paperwork.”
Oil prices face ‘renewed volatility’ over Hormuz
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Oil prices could face “renewed volatility” if the Strait of Hormuz is not reopened in a clean and orderly fashion by both Iran and the US simultaneously, an analyst warned.
Suvro Sarkar, the head of DBS Bank’s energy research, said the US-Iran deal’s first phase, encompassing the Geneva signing of an extension of the 60-day ceasefire, would buy time and kick the “nuclear can” down the road.
But the phased reopening of the Strait of Hormuz and the wind-down of the US naval blockade on Iranian ports and vessels would be watched most closely by markets for its physical impact, he added.
Mr Sarkar said: “Anything other than a clean simultaneous unlock will mean renewed volatility in oil prices.
“Given the trust deficit so far, it will be interesting to see how this plays out over the next couple of weeks.”
Oil edges lower despite Trump insisting Hormuz will reopen
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Oil prices were little changed despite Donald Trump insisting the Strait of Hormuz would be fully reopen by Friday.
Brent crude, the international benchmark, edged down 0.6pc below $83 a barrel, slowing down sharply from its pace of decline on Monday.
Brent crude fell 4.8pc over hopes that the US-Iran agreement might reopen the Strait of Hormuz, where a fifth of the world’s oil and gas exports usually pass.
However, analysts say it will be several weeks for tanker movements to ramp up despite Donald Trump insisting the waterway will be fully reopen by Friday.
Morgan Stanley analysts told clients: “From here, it likely takes several weeks for tanker flow to be restored.”
Good morning
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Thanks for joining me. Shipping will take “weeks” to resume through the Strait of Hormuz as shipowners wait for signs that the US-Iran deal is “material”, the boss of the world’s largest tanker company said.
Jotaro Tamura, the chief executive of Mitsui OSK, said many vessels would wait to restart shipping despite Donald Trump declaring the waterway had already been partially reopened.
The US president said the vital oil route would be “completely open” by Friday, after Washington and Tehran announced a deal to end the Middle East war.
In a Truth Social post, he said that ships loaded with oil are starting to move out of the strait, “going along the Southern ‘Highway,’ which is totally safe, secure, and pristine”.
However, Mr Tamura suggested that in practice the resumption of shipping would take much longer.
“What will have to come in place is not just a simple agreement between the relevant countries, but it has to be material and translated into the real situations in the Strait of Hormuz, so that shipping lines can make themselves comfortable to go through,” he told the Financial Times.
“Given the experiences in the last couple of months, I think it’s reasonable to assume that it may take at least a couple of weeks or if not a month.” Here is what you need to know.
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What happened overnight
Asian shares mostly rose over hopes that shipping will resume through the Strait of Hormuz.
Japan’s benchmark Nikkei 225 briefly topped 70,000 for the first time Tuesday before trimming early gains after the Bank of Japan raised its key interest rate to 1pc.
The quarter percentage point hike took the benchmark rate to its highest level in 31 years.
By early afternoon, the Nikkei 225 was up 0.6pc at 69,713.05, while South Korea’s Kospi moved further into record territory, gaining 2.1pc to 8,721.64.
The Shanghai Composite gained less than 0.1pc to 4,100.53.
Australia’s S&P/ASX 200 lost 0.3oc to 8,892.10 and Hong Kong’s Hang Seng slipped 1.3pc to 24,533.35.
In Taiwan, the Taiex was up 0.6pc, while India’s Sensex picked up 0.5pc.
Stocks on Wall Street climbed to a record high on Monday after the United States and Iran announced a tentative deal to reopen the Strait of Hormuz.
The proposed peace agreement pushed the Dow Jones Industrial Average up 0.9pc to close at a record high of 51,671.03. The S&P 500 also gained 1.7pc.
The tech-focused Nasdaq Composite climbed 3.1pc. It was boosted by Elon Musk’s SpaceX, which surged by 19.6pc on its second day of trading.