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Oil prices crashed and stock markets surged around the world on Wednesday after the United States and Iran agreed a two-week conditional ceasefire, with global investors exhaling collectively at the first serious off-ramp from a war that had pushed crude above $110 a barrel and rattled financial markets for five weeks.
Brent crude fell 13.5 percent to $94.36 a barrel by late Wednesday afternoon London time — its steepest single-day decline since the Covid-19 lockdowns of 2020. US crude dropped 15.5 percent to $95.36. Wall Street posted its biggest single-day rally in a year, with the Dow Jones gaining more than 1,300 points, or 2.9 percent, to close at 47,909. The S&P 500 advanced 2.5 percent and the Nasdaq climbed 2.8 percent. In Asia, South Korea’s Kospi soared 7.5 percent, Japan’s Nikkei gained more than 5 percent and Australia’s benchmark index rose 2.55 percent. Europe’s Stoxx 600 recorded its best session in a year, gaining 3.7 percent.
The trigger was a deal struck with just over an hour remaining before Trump’s self-imposed deadline for strikes on Iranian power plants and bridges. The president said he was holding off on his threatened bombardment, subject to Tehran accepting a two-week ceasefire and allowing passage through the Strait of Hormuz. Iran’s national security council confirmed it had accepted the terms if attacks against the country were halted. Foreign Minister Abbas Araghchi said Hormuz would be open to shipping for two weeks under the management of Iran’s military. Peace negotiations, Tehran said, would begin in Islamabad on Friday.
Investors placed a combined $950 million bet on falling oil prices just hours before the ceasefire was announced, Reuters reported — a detail that will fuel questions about what was known and when.
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The relief, however, was complicated before Wednesday’s trading even closed. Israel launched its biggest strikes yet on Lebanon, and reports emerged that Iran had halted oil tanker passage through the strait over what it described as an Israeli ceasefire breach. Separate reports of an attack on Saudi Arabia’s east-west pipeline — the alternative route for Gulf crude that bypasses Hormuz entirely — nudged prices back up from their lows. Oil companies fell sharply on the stock markets that celebrated everywhere else, with BP down 6 percent and Shell losing 4.7 percent.
The fundamental questions about the ceasefire’s durability were already being asked by the time markets closed. Iran has proposed a 10-point framework whose terms Washington had not formally accepted. How the strait will be managed after the two-week grace period remains unresolved. Reports suggest Iran may seek transit fees of between $1 million and $2 million per tanker — an arrangement that analysts at Capital Economics described as a potential “de facto partial nationalisation” of the shipping route, adding roughly $1 per barrel to oil transported through the strait.
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“A two-week ceasefire would enable a release of some oil and LNG tankers from the strait to market, providing some market pressure relief in May,” said Saul Kavonic of MST Financial. “This does not result in more production, just a release of storage on water.” He described the pause as an off-ramp for Trump’s ultimatum, but not yet an off-ramp for oil markets or the war itself.
Kathleen Brooks of XTB put the conditions plainly: markets would monitor the truce closely, and “only if the US or Iran walk away from the ceasefire completely and bombing restarts do we see the oil price potentially surging back to the highs of this week above $110 per barrel.”
Jim Reid of Deutsche Bank said investors were breathing a sigh of relief, while flagging the unanswered questions that remain. “Will the ceasefire hold? Can talks lead to a permanent cessation of hostilities?” he asked. “We saw some strikes by Israel and Iran overnight, though these may have been in the works before the conditional ceasefire.”
Gold rose more than 2 percent to $4,812 an ounce. Bitcoin advanced 2.9 percent. Treasury yields eased, with the 10-year US yield falling to 4.24 percent from 4.30 percent. European gas prices fell 17 percent.
Prices remain well above pre-war levels — Brent traded below $73 a barrel before February 28. Analysts at TD Securities said renewed escalation cannot be ruled out, but that markets are treating the ceasefire as credible for now. The longer-term inflation implications of an oil price permanently higher than its pre-war baseline, they noted, will remain a defining theme for markets regardless of how the diplomacy unfolds.
