Oil prices tumbled on Wednesday and global stock markets rallied after the US and Iran agreed a two-week conditional ceasefire. Investors welcomed the news that Donald Trump had 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 for the next two weeks under the management of Iran's military. Wall Street recorded its biggest single-day rally in a year.
Brent crude oil, the international standard, dropped by 16%, while US crude oil futures sank by 17.6%. However, prices later recovered off their lows as Israel launched its biggest attacks yet on Lebanon and on reports that Iran halted the passage of oil tankers because of an alleged Israeli ceasefire breach. By late Wednesday afternoon London time, Brent crude 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.
European stock markets rallied strongly on Wednesday. The pan-European Stoxx 600 index gained 3.7%, its biggest one-day rise in a year. In London, the FTSE 100 index closed up 2.5% at 10,608.9 points, its highest end-of-day level since the early days of the Iran war. US stock markets also jumped, with the benchmark S&P 500 rallying by 2.5% to 6,782.81 and the Dow Jones industrial average gaining more than 1,300 points, or 2.9% – its best day since April 2025.
Kathleen Brooks, a research director at the trading platform XTB, said markets would be monitoring the fragile truce. “Only if the US or Iran walk away from the ceasefire completely and bombing restarts do we see the oil price potentially surging back to the highs of this week above $110 per barrel for Brent crude, which could also cause stocks and bonds to slump,” she said. European gas prices slumped, with the month-ahead UK gas contract down 17% at 111.1p a therm.
