Oil Price Plunge Boosts Stocks as Inflation Fears Eased
Hong Kong share markets rallied on Monday as oil prices plummeted following a lull in fighting in the Gulf, easing inflation concerns and boosting bonds ahead of central bank meetings.
The US military reportedly expressed concern about dwindling ammunition supplies after Iran announced it would halt its own attacks if the US did the same. However, Yemen's Iran-aligned Houthis still attacked Saudi oil installations along the Red Sea coast, threatening another vital waterway in the global oil trade.
Sally Auld, group chief economist at NAB, noted that developments in the Middle East have moved in a positive direction over the weekend, potentially leading to de-escalatory behavior from both sides. This led Brent crude to slide 5.2% to US$91.73 a barrel and US crude dropped 5.4% to US$84.45.
The pullback in oil reduced the probability of rate hikes from the US Federal Reserve, with markets implying around a one-in-three chance of a rate rise at this week's meeting. The Bank of England holds its meeting on Thursday and the Bank of Japan on Friday, both expected to hold steady while remaining cautious about inflation risks.