- Oil falls 2.8% to about $77 a barrel, lowest since early March
- Tokyo and Seoul shares hit record highs overnight while Europe's STOXX 600 slips 0.5%
- Money markets now fully expect a U.S. rate hike by October
- Bank of England leaves rates on hold, as expected
LONDON, June 18 (Reuters) - Global stocks were torn on Thursday between concern about the rising chances of a U.S. rate hike this year after the Federal Reserve's meeting and optimism over the reopening of the Strait of Hormuz.
The United States and Iran on Wednesday released the text of their agreement, which extends a ceasefire announced in April by another 60 days to allow the two sides to negotiate a truce. It also includes the full resumption of maritime traffic "with no charge" in the Strait of Hormuz.
Against that backdrop, oil dropped another 2.8% to around $77 a barrel, the lowest since early March. Global stocks dipped 0.1%, as futures and shares in Europe fell, shaking off shares in Tokyo and Seoul hitting record highs overnight.
The interim deal would mark a significant step toward normalising crude supply and prices, but Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, cautioned uncertainties remained.
U.S. President Donald Trump threatened to resume attacks and kill Iranian officials if they failed to honour their commitments.
"The current toll-free transit period is limited to 60 days, and the future framework remains uncertain, leaving lingering concerns," Maruyama said in a note.
In Europe, the STOXX 600 fell 0.6%, as declines in energy shares like Shell, TotalEnergies and BP offset gains in tech stocks like ASML and Infineon.
Europe is more vulnerable to an increase in inflation from higher oil prices than the United States and so falling oil prices are good for European economies, but the weight of energy shares on various national markets kept the pan-regional index slightly in the red.
Futures on the S&P 500 rose 0.5%, while those on the Nasdaq 100 E-minis were up 1.2%, reflecting the strength in some of the big tech stocks, such as Nvidia, Meta and Apple, which were up between 0.5% and 1.3% in the premarket.
The dollar rose for a second day after the Fed, in its first meeting under new Chair Kevin Warsh, left rates in a 3.50% to 3.75% range. Nearly half of its policymakers indicated they now this year, as concerns mount on inflation.
For his part, Warsh opened the new era with a sweeping and did not add his own forecasts for rates to the so-called "dot plot" - a visual representation of where each member expects rates to be over time.
Money markets show traders now fully expect a rate hike by October, from a roughly 80% chance of a hike by the end of the year earlier in the week.
"We had expected Warsh to sound critical of forward guidance, but he has been even quicker than we thought at introducing his style of leadership to the Fed. While some worry that a lack of guidance from the Fed could confuse financial markets, we think that the opposite is true. The laser focus on prices could ultimately make it easier to predict what the Fed does next," XTB research director Kathleen Brooks said.
The dollar index , which tracks the U.S. currency against six others, was up 0.4% at 100.77, near its highest for two months. The euro was down 0.4% at $1.146, while the pound was down 0.6% after the Bank of England left interest rates unchanged.
Benchmark U.S. 10-year notes were last yielding 4.46%, flat on the day, while 2-year notes, which are more sensitive to Fed expectations , were up 3 bps at 4.19%, having posted their worst daily performance in three months the day before.
Additional reporting by Satoshi Sugiyama in Tokyo; Editing by Neil Fullick, Susan Fenton, Elaine Hardcastle
Source: Reuters