April 8 (Reuters) - U.S. stock index futures jumped on Wednesday as investors breathed a sigh of relief after the U.S. and Iran agreed to a two-week ceasefire, sending crude prices lower on expectations that energy supplies from the Middle East could resume.
The announcement late on Tuesday came hours before Trump's deadline, after which he said the U.S. would inflict devastating attacks on Iran's civilian infrastructure if Tehran did not reopen the strategic Strait of Hormuz.
The rally was visible
across global asset classes. Equity indexes in major Asian and European markets shot up between 4%-5%, while crude prices rolled 16% to near $90 a barrel, and the dollar, which had seen safe-haven interest over the past month, fell 1% against the Japanese yen.
Investors have been navigating the ebb and flow of the conflict that has extended to over a month, as Trump suggested an earlier end to the war several times, while on the flipside, Iran has denied all reports of negotiations.
The worry is that the prolonged conflict and soaring energy costs could weigh on economic growth and complicate the Federal Reserve's monetary policy path. March was the benchmark S&P 500's biggest monthly fall in a year.
Short-term Treasury bond yields, a reflection of interest rate expectations, slipped on Wednesday, and interest rate futures suggest investors expect the Fed to keep borrowing costs unchanged this year, according to LSEG-compiled data.
Before the war, traders had been betting on at least two 25-basis-point interest rate cuts this year, but at one point last month, inflation concerns had them wagering on a potential rate hike.
At 03:17 a.m. ET, Dow E-minis were up 1,083 points, or 2.31%, and S&P 500 E-minis were up 168.5 points, or 2.53%. Nasdaq 100 E-minis were up 790.5 points, or 3.24%
Futures tracking the rate-sensitive Russell 2000 Index jumped 3.4%, while contracts tracking the CBOE Volatility Index, Wall Street's fear gauge, slid 4.8 points to over a two-week low.
(Reporting by Johann M Cherian in Bengaluru; Editing by Rashmi Aich)
