Hundreds killed in Lebanon, oil surges

Source: Reuters.

The violence comes as Iran’s president insists Lebanon was included in his ceasefire agreement with the US - a claim disputed by Washington and complicating fragile truce efforts.

Against this backdrop, investors are reassessing risk with oil and the dollar strengthening amid scepticism over whether diplomatic efforts can stabilise the region.

"Markets remain circumspect over the two-week ceasefire as Tehran accuses the US and Israel of breaching the agreement, and casting doubt on the effectiveness of today's peace talks in Islamabad," Wichard Cilliers, head of market risk at TreasuryOne, says.

He confirms that the Strait of Hormuz remains effectively closed to commercial shipping, with reports that only four vessels have passed through since the ceasefire announcement.

Oil, dollar rebound

Meanwhile, oil and the dollar are regaining some ground. "Brent crude is up over 2.0% at $97.00 this morning, while the Dollar DXY index is up at the 99.00 level. Israel's continued attacks on Hezbollah in Lebanon remain the main geopolitical stumbling block," Cilliers says.

"The rand gained nearly 3% against the dollar yesterday, on the back of the ceasefire news and improved risk sentiment. The local currency currently sits at R16.42 against the dollar, and is likely to remain volatile in the short term, driven by headlines."

The price of gold is also holding steady as markets remain cautious about the fragility of the ceasefire, and ahead of the peace talks in Pakistan.

Markets are awaiting US PCE inflation data later today for some indication of the inflation outlook.

The price of gold is quoted at $4,720.20 per ounce.