Stock market analysts and gold traders are bullish on the newly struck deal to end the three-month-long US-Iran war, pinning hopes on the Strait of Hormuz being opened on Friday to ease inflationary and cost pressures for the Thai economy and businesses.
West Texas Intermediate (WTI) crude plunged 5% to US$80.52 per barrel by midday on Monday, while Brent dropped 4.5% to $83.40, as Middle East developments turned increasingly positive following an agreed US–Iran peace framework, with an official signing expected this Friday.
Both sides confirmed that the agreement would include an end to military clashes between the US and Iran, Israel and Lebanon, and the full reopening of the Strait of Hormuz, one of the world's most important energy transit routes.
The reopening of the Strait of Hormuz has eased concerns over energy supply disruptions, said Wikij Tirawannarat, senior vice-president of Bualuang Securities.
"Brent has declined to about $80 now from $120 at the start of the US–Iran war. Domestic retail oil prices are expected to fall soon, helping to lower costs for companies that have been pressured by elevated oil prices, such as paper and petrochemicals," said Mr Wikij.
Domestic consumption and the banking sector will also get a boost as petrol prices ease, he added.
Nattawat Onratn, senior executive vice-president at CGS International Securities Thailand, is confident that the US–Iran peace deal will be signed this Friday, citing the recent oil price retreat.
The European Union welcomed a deal between the US and Iran to end the Middle East war, adding that the bloc was ready to contribute to a strategy for "lasting peace", said Mr Nattawat.
"This backdrop is supportive for Thai equities," he noted, adding that the Stock Exchange of Thailand (SET) would once again surpass the key psychological level of 1,600 points soon. "The next level of the Thai benchmark SET index that we are seeing at present is 1,700 points," he added.
POSITIVE FOR GOLD
Besides stocks, gold is also buoyant, as lower oil prices have eased concerns about inflation and higher interest rates.
Bullion climbed by as much as 2.5% to $4,322 an ounce in early-hours trading before easing to $4,315 an ounce, up 0.92% from the previous session. Locally, the price of gold bars rose by 1,100 baht per baht-weight to 66,600 baht, according to the Gold Traders Association.
"Lower oil prices to a two-month low pushed gold prices higher as it reduced concerns that higher energy costs could keep inflation elevated," said Siriluck Pakotiprapha, vice-president of the research department at Hua Seng Heng.
Investors are also focusing on this week's US Federal Reserve policy meeting, the first under new Chair Kevin Warsh.
As the US central bank is widely expected to leave interest rates unchanged, Ms Siriluck said the market is keen on Mr Warsh's statement and the Fed's new dot plot rate forecast to be released after the meeting.
Gold, which does not yield interest, is sensitive to expectations of borrowing costs.
Hua Seng Heng, Thailand's largest gold trader, now sees a short-term resistance for gold at $4,460 an ounce. In the case that the peace deal signing is delayed, bullion should not fall below $4,200, she told the Bangkok Post.
