Global Equities Rally as De-escalation Hopes Emerge but Oil Risks Persist

Global stock markets staged a broad-based rallied on Wednesday after President Donald Trump signalled that United States military strikes against Iran could conclude within weeks, even in the absence of a formal diplomatic agreement with Tehran. The remarks prompted a reassessment of risk across equity markets, though oil prices remained elevated amid persistent uncertainty over the critical Strait of Hormuz shipping corridor.

The FTSE 100 gained 1.6 per cent to reach 10,382 in early afternoon trading in London, while European indices registered stronger advances, with Germany’s DAX climbing 2.8 per cent and France’s CAC 40 adding 2 per cent. The rally extended across Asia, where Japan’s Nikkei 225 closed 5.2 per cent higher, ending a four-day losing streak, and South Korea’s Kospi surged as much as 8 per cent at its intraday peak. Wall Street was expected to open higher, building on Tuesday’s gains in which the S&P 500 advanced 2.9 per cent as traders priced in the prospect of an earlier end to hostilities.

Brent crude, whilst retreating from its recent highs, continued to trade near historically significant levels. The June one-month futures contract, which replaced the expired March contract, fell 2.4 per cent to USD 101.42 per barrel. The decline followed a striking March performance in which Brent recorded its largest monthly gain on record, surging 63.3 per cent from below USD 73 per barrel at the end of February to USD 118.35 on Tuesday evening, representing a 9 per cent gain since the start of the year. A drone strike on a tanker off the coast of Qatar, occurring overnight amid continued Iranian military activity, underscored the fragility of the current situation and kept crude markets on edge.

The International Energy Agency described the effective closure of the Strait of Hormuz as “the largest supply disruption in the history of the global oil market,” a characterisation that carries considerable weight given that the strait facilitates the passage of approximately 20 per cent of global oil and liquefied natural gas trade. Analysts cautioned that even a diplomatic breakthrough is unlikely to produce an immediate normalisation of tanker traffic through the waterway, with damage to oil infrastructure expected to sustain supply constraints in the near term.

LSEG analysts struck a notably cautious tone in a research note, stating that “the combination of limited tangible diplomatic progress, continued maritime attacks and explicit threats against energy assets keeps supply risks skewed to the upside,” notwithstanding the intermittent de-escalatory signals from Washington. The assessment reflects a broader market view that geopolitical risk premiums embedded in the oil price are unlikely to dissipate quickly, regardless of the diplomatic posturing. Concerns have been widely circulated that Brent crude could reach USD 150 per barrel should the Strait of Hormuz remain closed for a prolonged period.

On the currency front, the US dollar index edged 0.55 per cent lower to 99.42, following its steepest single-day decline since 19 March. The dollar’s weakness coincided with a notable repricing of Federal Reserve interest rate expectations. According to the CME Group’s FedWatch tool, fed funds futures are now pricing in a 32 per cent implied probability of a 25 basis point rate cut in July, a sharp upward revision from the 7.5 per cent probability registered just one day prior. The shift suggests that market participants are beginning to factor in the economic consequences of sustained geopolitical disruption, including the potential inflationary drag from elevated energy prices and the possibility of a Fed policy response.

White House press secretary Karoline Leavitt confirmed via X that President Trump would address the nation on Wednesday evening to deliver what she described as “an important update on Iran,” adding a further layer of anticipation to an already volatile market session. The president’s earlier remarks that he would “leave it to other nations to resolve issues regarding the Strait of Hormuz” were interpreted by some market participants as a potential softening of the US posture, though the substance of any such shift remains to be seen. Experienced investors will be well aware that geopolitical announcements of this nature carry significant execution risk and that the gap between diplomatic signals and verifiable progress on the ground can be considerable.