Oil prices plunged and stock markets rallied on Wednesday after the US and Iran agreed a two-week conditional ceasefire. The agreement came as Donald Trump held off on his threat to bomb Iran, while Iran’s foreign minister, Abbas Araghchi, said passage through the Strait of Hormuz would be allowed under Iranian military management for the next two weeks.
Brent crude oil fell by 16% and US crude futures sank by 17.6%, though prices later recovered partially. By late Wednesday afternoon London time, Brent was down 13.5% at $94.36 a barrel, and US crude was down 15.5% at $95.36 a barrel, heading for its biggest one-day fall since the Covid-19 lockdowns six years ago. The drop came despite uncertainty over whether the US would accept Iran’s 10-point proposal and how the strait would be managed beyond the two-week period.
Global stock markets surged on the news. The pan-European Stoxx 600 gained 3.7%, its biggest one-day rise in a year, while London’s FTSE 100 closed up 2.5% at 10,608.9 points. In the US, the S&P 500 rallied 2.5% and the Dow Jones gained over 1,300 points, its best day since April 2025. Asian markets also saw strong gains, with Japan’s Nikkei 225 rising over 5% and South Korea’s Kospi soaring 7.5%.
However, analysts warned the truce was fragile. Kathleen Brooks of XTB said markets would monitor the situation closely, noting that a complete breakdown of the ceasefire could send oil prices surging back above $110 per barrel. Meanwhile, European gas prices slumped, with the month-ahead UK gas contract down 17% at 111.1p a therm.
