An easing of tensions between the U.S. and Iran looks set to weigh on Australian energy shares on Thursday.
This could mean the likes of Beach Energy Ltd (ASX: BPT), Oil Search Limited (ASX: OSH), Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) give back the gains they made on Wednesday and more.
What happened?
On Wednesday oil prices zoomed higher after Iran retaliated to the U.S. killing of Gen. Qasem Soleimani by firing a barrage of missiles at American targets in Iraq.
This sparked fears of a widening conflict in the Middle East, with the potential to disrupt regional crude supplies. However, comments by President Trump overnight have eased concerns and put pressure on oil prices.
According to CNBC, President Trump said that Iran "appears to be standing down" following its attack. And while Trump will "immediately impose additional punishing economic sanctions on the Iranian regime," this is far more lenient than traders were expecting.
The U.S. President also suggested that the White House is open to negotiations with Iran.
"We must all work together toward making a deal with Iran that makes the world a safer and more peaceful place," Trump added.
The reaction.
The share market reacted by rotating back into risk assets, sending the S&P 500 index up to a record high.
This came at the expense of the gold price and miners of the precious metal. Which could be bad news for the likes of Resolute Mining Limited (ASX: RSG) and St Barbara Ltd (ASX: SBM) today.
But the worst impacted shares are likely to be Oil Search and the rest of the energy producers after oil prices fell heavily.
According to Bloomberg, overnight the WTI crude oil price fell 5.1% to US$59.53 a barrel and the Brent crude oil price dropped 4.4% to US$65.30 a barrel.
Conversely, this news will no doubt come as a relief to shareholders of Qantas Airways Limited (ASX: QAN). Its shares have come under pressure this week amid concerns that rising oil prices could lead to higher fuel costs in the future.
