The price of oil fell sharply while global stock markets surged after the United States and Iran agreed to a conditional two-week ceasefire, offering relief to investors following weeks of instability.
Markets reacted quickly to the announcement, with traders welcoming the prospect of reduced tensions in a region critical to global energy supplies. The agreement includes provisions linked to reopening the Strait of Hormuz, a key shipping route for oil.
Benchmark Brent crude dropped by more than 14% to around $93.6 per barrel, reflecting easing fears over supply disruptions. However, prices remain significantly higher than before the conflict began, when oil was trading closer to $70 per barrel.
Equity markets also posted strong gains. London’s FTSE 100 rose by as much as 2.6% at the start of trading, while the FTSE 250 climbed even higher. Asian markets recorded similar momentum, with Japan’s Nikkei 225 and South Korea’s Kospi both rising by over 5%.
The ceasefire follows weeks of escalating tensions and comes shortly after warnings from Donald Trump, who had threatened to expand military operations if Iran did not agree to terms, including reopening the vital shipping corridor.
Investors appear to be responding to signs that further escalation may be avoided, at least in the short term. Analysts say the truce could help stabilise markets that have been under pressure since the conflict began.
According to Susannah Streeter, chief investment strategist at Wealth Club, the agreement has triggered “a wave of relief” across financial markets. She noted that while uncertainty remains, there is cautious optimism that the ceasefire could lead to a longer-term resolution.
“The two-week ceasefire is likely to be fraught with uncertainty, but for now there are hopes it may be a precursor to a more lasting agreement,” she said.
Josh Gilbert, market analyst at eToro, also urged caution, warning that markets could be reacting too quickly. “A two-week window is not a permanent resolution,” he said, adding that sustained progress in negotiations will be needed to maintain market confidence.
The recent spike in oil prices has already pushed up petrol and diesel costs in several countries, fuelling concerns about the cost of living. Any stabilisation in energy markets could help ease pressure on consumers, although analysts say the situation remains fluid.
While the immediate reaction has been positive, the durability of the rally will depend on whether the ceasefire holds and whether diplomatic efforts succeed in preventing a renewed escalation.