Photo Credit: Reuters
Oil prices plunged, bonds rallied and global equities surged on Wednesday after a two-week ceasefire in the Middle East triggered a wave of relief across financial markets, with investors optimistic about the potential resumption of oil and gas flows through the Strait of Hormuz.
U.S. President Donald Trump said he had agreed to halt bombing and military operations against Iran for two weeks, adding that negotiations toward a longer-term peace agreement were underway.
Markets have been volatile since late February, when U.S. and Israeli strikes on Iran prompted Tehran to effectively shut down the Strait of Hormuz — a critical route for roughly one-fifth of global oil and gas shipments.
Following news of the ceasefire, U.S. crude futures dropped about 16.5% to $94 per barrel, while S&P 500 futures jumped more than 2%. The U.S. dollar, which had served as a safe-haven asset during the conflict, weakened broadly.
“Markets had been anticipating that Trump was seeking an exit strategy in Iran,” said Jamie Cox, managing partner at Harris Financial Group. “Now he’s found one and acted on it.”
Asian stock markets were also set to rebound, with futures pointing to strong gains after weeks of pressure from rising energy costs and geopolitical uncertainty. Meanwhile, 10-year U.S. Treasury futures rose around 15 ticks, reflecting increased demand for bonds.
Currency markets saw a shift toward riskier assets, with the Australian dollar climbing 1.3% above $0.7070 and the euro advancing 0.76% to $1.1683. Cryptocurrencies also moved higher.
Trump had previously set a late Tuesday deadline for Iran to reach an agreement, warning of potential strikes on key infrastructure if the Strait of Hormuz remained closed. Iran, in turn, had threatened retaliation against U.S. allies in the Gulf.
The six-week conflict has driven oil prices sharply higher, fuelling inflation concerns and disrupting global economic expectations as governments and businesses grapple with the energy shock.
In commodities, gold prices rose more than 2% to $4,812 per ounce.