Main developments
President Donald Trump said he would “suspend the bombing and attack of Iran for a period of two weeks” subject to the country reopening the Strait of Hormuz.
Iran’s foreign minister said his country’s armed forces would halt military operations and allow safe passage through the strait if the US stopped its attacks.
Brent crude, the international benchmark, fell 15 per cent. US Treasury bonds surged in Asian trading. Shares in Japan rose.
Pakistan had requested Trump extend his 8pm ET deadline for bombing civilian infrastructure in Iran and asked the Islamic republic to reopen the waterway.
Trump had on Tuesday morning escalated his rhetoric against Iran and warned that a “whole civilization will die tonight” if Tehran did not strike a deal to reopen the strait by his deadline.
The US president had previously warned of major attacks on Iran’s bridges and power plants if Tehran.
Attacks on “objects indispensable to the survival of the civilian population” are prohibited under international law.
US Treasury bonds surge in early Asian trading
US Treasury bonds surged in early Asian trading after Washington and Tehran announced that they had agreed to a two-week ceasefire that would open the Strait of Hormuz.
Treasury yields, which move inversely to price, dropped to their lowest level in two weeks as traders pulled back on bets that a prolonged disruption to the global oil trade would push inflation higher and potentially force the Federal Reserve and other central banks to raise interest rates.
The two-year yield, which is particularly sensitive to monetary policy, fell by 0.1 percentage points to 3.73 per cent. The 10-year yield, which moves with inflation and growth expectations, declined by 0.08 percentage points to 4.26 per cent.
Japan stocks jump at open
Japanese stocks surged 4.75 per cent in the first 15 minutes of trading on Wednesday as news of a conditional ceasefire between the US and Iran triggered a massive relief rally.
The sharp rise in shares, which was accompanied by US crude oil futures dropping below $100 per barrel, took the Japanese benchmark stock index to a one-month high.
The yen also strengthened against the US dollar, rising to a level of ¥158.7 on expectations that a calmer situation in the Middle East could clear the way for the Bank of Japan to raise interest rates later this month.