US, Iran agree to ceasefire and Strait of Hormuz opening
- Sydney (8 April)
Iran and the US have agreed to halt hostilities and reopen the Strait of Hormuz for two weeks as they work to secure a permanent peace deal, potentially dulling the war’s inflationary impact.
The US, Iran, and their allies have agreed to an immediate ceasefire everywhere, including Lebanon, effective immediately, Pakistan’s Prime Minister Shehbaz Sharif announced on 8 April.
The ceasefire will run for two weeks, alongside negotiations in Islamabad set to begin on 10 April, the US and Iranian governments have confirmed. Iran will also allow ships to transit through the Strait of Hormuz during the ceasefire.
“For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration of technical limitations,” Iran’s Foreign Minister Abbas Araghchi said in a statement.
The Pakistan-brokered ceasefire could limit the inflationary impact of the US-Israeli war in Iran.
Producers in Australia and New Zealand have faced increased costs over the past month because of maritime disruptions at the Strait of Hormuz, which could lead to higher prices. In New Zealand, 58% of businesses surveyed by the Employers and Manufacturers Association plan to raise prices because of the war, the industry group said on 7 April.
But cost increases in New Zealand have likely come, primarily, from oil inflation. The country does not directly rely on the Strait of Hormuz for oil shipments. It mostly imports refined oil products from producers in South Korea, Singapore, Malaysia, and Japan. But those producers’ crude feedstock moves through the strait.
The price of Brent crude futures rose from $72.9/barrel on 27 February – right before the war – to $101.1/barrel on 7 April, according to Trading Economics. This pushed up the price of New Zealand diesel by 68% over the month to 8 April, from NZ$2.28/litre to NZ$3.84/litre, according to price monitor Gaspy, impacting production costs.
In the agricultural sector, for instance, recent fertiliser price increases have likely come from increased delivery costs to farms, Federated Farmers’ Northland President Colin Hannah told Lithos today. Most fertiliser producers expect stocks on hand to last until spring, Hannah added.
But the price of Brent crude futures fell to $94.4/barrel immediately after the ceasefire was announced, which could cut diesel and transport costs for producers and limit price increases.
By Avinash Govind