Global Markets Rally and Oil Prices Retreat Following US Iran Temporary Ceasefire Agreement

Global equity markets have surged whilst crude oil prices experienced a dramatic decline following the announcement of a conditional two-week ceasefire agreement between the United States and Iran, which encompasses provisions for the reopening of the strategically vital Strait of Hormuz.

Brent crude experienced a sharp retreat, tumbling more than 15 per cent to trade below $92 per barrel, whilst West Texas Intermediate similarly declined to just under $94 per barrel. Despite this substantial correction, prices remain elevated compared to pre-conflict levels of approximately $70 per barrel observed prior to 28 February, when hostilities commenced.

Energy costs have risen substantially as petroleum and natural gas supplies from the Middle East faced severe disruption after Iran threatened maritime traffic attempting passage through the strait. This followed retaliatory measures against US and Israeli airstrikes targeting Iranian infrastructure.

US equity markets opened with significant gains, notwithstanding lingering uncertainties regarding the durability of the ceasefire arrangement. The Dow Jones Industrial Average and S&P 500 advanced more than 2.5 per cent, whilst the technology-weighted Nasdaq climbed 3.3 per cent. European bourses recorded equally robust performances, with London’s FTSE 100 gaining 3 per cent during mid-afternoon trading. France’s CAC 40 surged 4.9 per cent, whilst Germany’s DAX rose in excess of 5 per cent.

Asian markets had earlier posted substantial gains, with Japan’s Nikkei 225 closing nearly 5.4 per cent higher and South Korea’s Kospi jumping more than 6.8 per cent. Hong Kong’s Hang Seng concluded trading 3 per cent higher, whilst Australia’s ASX 200 advanced 2.5 per cent.

President Trump confirmed via social media on Tuesday evening his agreement to suspend military operations against Iran for a fortnight, conditional upon Tehran ensuring the complete, immediate and safe reopening of the Strait of Hormuz. The deadline of 20:00 EDT on Tuesday had been accompanied by stark warnings of catastrophic consequences should negotiations fail.

Iranian Foreign Minister Abbas Araghchi responded via social media, stating that Tehran would agree to a ceasefire provided attacks against Iran ceased, adding that safe passage through the waterway would subsequently become possible.

Market observers suggest Trump faced considerable incentive to prevent energy prices from escalating further through military escalation. Xavier Smith, research director at AlphaSense, noted that allowing such an outcome would constitute a self-inflicted economic wound, particularly given political considerations surrounding presidential approval ratings.

Whilst some vessels have navigated the Strait of Hormuz in recent days, traffic has remained substantially below normal levels. Analyst Saul Kavonic from MST Marquee suggested that if stranded oil tankers successfully transit the waterway during the ceasefire period, markets could experience some relief in coming weeks. However, reports emerging on Wednesday indicated that attacks in the region were continuing, which Pakistani Prime Minister Shehbaz Sharif characterised as undermining the peace process.

Kavonic cautioned that even with a ceasefire in place, full resumption of Middle Eastern energy production remains unlikely until confidence in a lasting peace settlement emerges. Restoration of production capacity could require months due to extensive damage inflicted upon regional energy infrastructure.

Iran has targeted energy and industrial facilities across the oil-rich region in response to US-Israeli strikes. ExxonMobil disclosed on Wednesday that its Middle Eastern oil production had declined 6 per cent during the first quarter compared with the corresponding period in 2025, directly attributable to the conflict.

Qatar’s Ras Laffan industrial complex, responsible for approximately one-fifth of global liquefied natural gas production, has sustained damage reducing the nation’s export capacity by 17 per cent. Facility operators have indicated that repairs could require up to five years to complete. Research firm Rystad Energy estimates total regional infrastructure damage could necessitate expenditure exceeding $25 billion over several years for full restoration.

Asian economies have experienced particularly acute economic consequences from the conflict, given their substantial dependence upon Gulf energy supplies. Governments and corporations throughout the region have implemented various measures in recent weeks to address elevated energy prices and fuel shortages. Regional airlines have raised fares and reduced flight schedules in response to surging jet fuel costs.

Ichiro Kutani from Japan’s Institute of Energy Economics highlighted that developing Asian nations lacking domestic refining capacity or adequate petroleum reserves have been especially affected. Whilst the ceasefire represents positive news for Asian countries, normalisation of oil prices will require time, even if the agreement holds.