Oil plunges 16% as Trump-Iran ceasefire sparks global market rally

Oil prices collapsed on Wednesday in their sharpest single day of decline since the pandemic began, as word spread that the United States and Iran had agreed to a two-week conditional pause in hostilities. Brent crude, the global benchmark, fell 16 percent. American crude futures dropped 17.6 percent. By late afternoon London time, Brent had settled at $94.36 a barrel, down 13.5 percent—a fall that would rank among the largest one-day moves in six years. The trigger was straightforward: Donald Trump had stepped back from his threat to strike Iran, and Iran's foreign minister, Abbas Araghchi, announced that passage through the Strait of Hormuz would resume for the next fourteen days under Iranian military supervision.

The market's relief was immediate and broad. Wall Street recorded its best single day in a year. The S&P 500 climbed 2.5 percent to close at 6,782.81. The Dow Jones industrial average gained more than 1,300 points, a 2.9 percent jump that marked its strongest performance since April 2025, finishing at 47,909.92. The Nasdaq Composite advanced 2.8 percent to 22,634.99. Across the Atlantic, Europe's Stoxx 600 index surged 3.7 percent, its largest one-day gain in a year. Travel stocks led the rally—Air France jumped 13 percent, Lufthansa rose 8 percent, British Airways owner IAG climbed 8 percent, and the holiday company Tui gained nearly 10 percent. In London, the FTSE 100 closed up 2.5 percent at 10,608.9 points, its highest finish since the early stages of the Iran conflict. Asia Pacific markets had already moved first: Japan's Nikkei 225 surged more than 5 percent, Australia's S&P/ASX 200 jumped 2.55 percent, South Korea's Kospi soared 7.5 percent, Hong Kong's Hang Seng rose 3.1 percent, and China's CSI 300 gained 3.2 percent.

The ceasefire itself remained conditional and fragile. Trump had announced his decision to hold fire just as his deadline was expiring on Tuesday. Iran's national security council confirmed acceptance of a two-week pause if attacks ceased, and both sides said peace negotiations would begin in Islamabad on Friday. Yet even as markets celebrated, complications emerged. Israel launched what were described as its largest attacks yet on Lebanon. Reports surfaced that Iran had halted oil tanker passage through the strait, citing an alleged Israeli breach of the ceasefire terms. Separate reports of an attack on Saudi Arabia's major east-west pipeline to the Red Sea—the route that allows oil exports to bypass the strait entirely—pushed prices back up from their lows. By day's end, the initial plunge had moderated somewhat, though the overall decline remained historic.

The uncertainty about what comes after two weeks hung over every calculation. The Iran proposal included a ten-point framework, but it remained unclear whether the United States would accept it. The mechanics of how the strait would be reopened and managed beyond the grace period had not been settled. Some reports suggested Iran might impose transit fees of $1 million to $2 million per tanker, which analysts estimated could add roughly $1 per barrel to shipping costs—a modest but real impact. Oil prices, despite their fall, remained well above prewar levels; Brent had traded below $73 a barrel before the conflict began. Investors had placed a combined $950 million in bets that oil would fall, hours before the ceasefire announcement.

Market strategists cautioned that the relief could evaporate quickly. Kathleen Brooks, research director at the trading platform XTB, warned that oil could surge back above $110 per barrel for Brent if either side walked away from the ceasefire and bombing resumed, which would likely drag stocks and bonds down with it. Jim Reid, a markets strategist at Deutsche Bank, noted that investors were taking the off-ramp gratefully but remained alert to whether the ceasefire would hold, whether it extended to Israel's operations in Lebanon, and whether talks could produce a permanent end to hostilities. Saul Kavonic, head of energy research at MST Financial, described the two-week pause as an off-ramp for Trump's ultimatum but not yet for oil markets or the war itself. He said it was unlikely that oil and liquefied natural gas production would resume until confidence in a lasting ceasefire had grown. A two-week pause might release some tankers and stored oil to market in May, providing temporary relief, but it would not restart production.

Beyond oil, the market's mood shifted across multiple asset classes. European gas prices fell 17 percent. Treasury yields eased on ceasefire hopes; the ten-year US Treasury yield dropped to 4.24 percent from 4.30 percent. UK government bond yields fell to 4.7 percent from 4.9 percent. Gold rose more than 2 percent to $4,812 an ounce. Bitcoin advanced 2.9 percent to $71,327, and ether climbed 5.6 percent to $2,234. Oil company shares, however, tumbled—BP fell 6 percent and Shell lost 4.7 percent. The divergence reflected the market's calculation: de-escalation was good for travel, leisure, and general economic activity, but bad for energy producers whose profits depend on high prices. Prashant Newnaha, a senior strategist at Singapore-based TD Securities, said markets were treating the ceasefire as genuine and that all parties would present it as a major victory. Yet he cautioned that renewed escalation could not be ruled out, and that even if the ceasefire held, oil prices were unlikely to return to prewar levels—a reality that would keep inflation pressure on central banks and markets for months to come.