Oil slumps and global stocks rally as US–Iran ceasefire lifts markets

Oil prices recorded their steepest fall in almost six years, while global equities rallied, after the United States and Iran agreed to a two-week ceasefire. The development offered markets a reprieve from weeks of volatility driven by tensions in the Middle East.

West Texas Intermediate crude dropped by as much as 19% after President Donald Trump agreed to suspend military action against Iran, easing concerns over disruptions to oil supplies. Iran said safe passage through the Strait of Hormuz would be maintained during the ceasefire. Brent crude fell 14% to $93.90 per barrel.

Equity markets climbed as investors bet that lower energy prices could ease inflationary pressure and support economic growth. MSCI’s Asia Pacific index rose 5.1% to a five-week high, while futures for US and European markets also advanced sharply.

Government bonds gained, reflecting renewed expectations that central banks, particularly the US Federal Reserve, may have room to cut interest rates. The dollar weakened as demand for safe-haven assets eased, while gold prices moved higher.

Read Also: World Bank recommends resumption of petrol imports

The ceasefire, announced just hours before a US deadline to escalate the conflict, has helped stabilise markets after six weeks of turmoil that pushed several indices into correction territory.

The agreement follows diplomatic pressure from Pakistan, which urged the US to step back from further escalation. While the pause creates room for negotiations, the conflict has already claimed thousands of lives and triggered a global energy shock.

A key test for how long the calm will last will be whether oil and gas flows through the Strait of Hormuz remain uninterrupted. Iran’s foreign minister, Abbas Araghchi, said transit would be coordinated with the country’s armed forces.

Shipping companies are now assessing the agreement in hopes of moving more than 800 vessels stranded in the Persian Gulf.

In bond markets, US Treasury yields fell as traders increased bets on interest-rate cuts later in the year. Markets are now pricing in a significantly higher probability of policy easing compared with earlier in the week.