Global financial markets surged on Wednesday after the United States and Iran agreed to a temporary two-week ceasefire, easing fears of prolonged disruption to energy supplies and sending crude prices sharply lower.
The announcement, which raised hopes of a reopening of the Strait of Hormuz, a key artery for global oil trade, triggered a broad-based relief rally across equities, bonds and commodities.
The ceasefire, however, remains conditional and fragile, with investors closely watching developments over the next two weeks to assess whether a more durable agreement can be reached.
Trump announces conditional pause in hostilities
US President Donald Trump said late Tuesday that Washington would suspend attacks on Iran for two weeks, provided Tehran ensures the reopening of the Strait of Hormuz.
In a social media post, Trump said that “subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz, I agree to suspend the bombing and attack of Iran for a period of two weeks.”
He added: “This will be a double sided CEASEFIRE!”
Trump said the US had received a 10-point proposal from Iran and believed “it is a workable basis on which to negotiate”, adding that the two-week window would allow an agreement to be “finalized and consummated”.
The announcement came just hours before a deadline set by the US president, marking a sharp shift from earlier rhetoric that had warned of severe escalation if Iran failed to comply.
Iran’s Foreign Minister Abbas Araghchi signalled a willingness to reciprocate.
He said that if attacks ceased, Iran’s armed forces would “cease their defensive operations”.
“For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration of technical limitations,” he said.
Oil prices fall, triggering global rally
The easing of tensions led to a sharp drop in oil prices, with both Brent and WTI futures falling back well below $100 a barrel.
Given that roughly one-fifth of global oil trade passes through the Strait of Hormuz, the ceasefire reduced fears of supply shocks that had dominated markets since the conflict began.
Almost every global asset has been focused on the oil price since the start of the Iran war, and so the retreat in crude prices helped major markets recover roughly half their losses from the conflict period.
Asian and European markets surge, US set to open higher
Equity markets across Asia and Europe posted strong gains.
South Korea led the rally, with the Kospi closing 7% higher, while Samsung Electronics and SK Hynix surged 7% and 13%, respectively.
Japan’s Nikkei 225 climbed over 5%, while Australia’s S&P/ASX 200 rose 2.6%.
In China, the CSI 300 gained 2.76%, and Hong Kong’s Hang Seng Index advanced 2.87%.
European markets followed suit. Germany’s DAX jumped 5.2% to 24,118, France’s CAC rose over 4%, Italy’s FTSE MIB gained 3.7% and Spain’s Ibex climbed 3.5%.
The UK’s FTSE 100 rose 2.6% to 10,615, its highest level since early March.
US futures also pointed higher, with E-mini S&P 500 futures up 2.7%, Dow futures rising 2.5% and Nasdaq 100 futures gaining 3.5%.
In India, benchmark indices surged nearly 4%, extending gains for a fifth consecutive session.
Short-term Treasury yields declined, reflecting easing inflation concerns tied to lower energy prices.
Interest rate futures indicate that investors now expect the Federal Reserve to keep borrowing costs unchanged this year.
US gainers and losers
US energy stocks mirrored the decline in global oil prices, falling sharply in premarket trade.
Exxon Mobil slipped 5.6%, Chevron fell 4.7%, and Occidental Petroleum dropped 7.1%.
In contrast, travel and leisure stocks advanced, buoyed by easing geopolitical concerns.
American Airlines and United Airlines rose 8.6% and 9.8%, respectively, while cruise operators Carnival and Norwegian Cruise Line gained 10.2% and 8.8%.
Major banking stocks also moved higher, with JPMorgan Chase, Bank of America and Wells Fargo each climbing more than 2.4%.
Why analysts are urging restraint for investors
Despite the strong rally, analysts warned that markets could reverse course if the ceasefire fails to hold.
“The rally will need to be backed up by tangible progress in negotiations to hold. The underlying question of whether Iran will permanently reopen the Strait of Hormuz and whether a lasting deal can be reached is still very much unresolved,” said Josh Gilbert, market analyst at eToro.
“If the two weeks pass without a deal, expect a sharp and unforgiving reversal of this relief rally.”
Analysts at Raymond James described the ceasefire as “a clear near-term positive, especially in the wake of increasingly extreme rhetoric”, but cautioned that deep disagreements remain.
They pointed to a “wide gulf” between US and Iranian positions on key issues such as uranium enrichment, suggesting that tensions could persist even if hostilities pause.
Fabian Yip, market analyst at IG, also urged restraint.
“Investors should resist the temptation to treat this as an all-clear signal. Several structural constraints will limit the extent of any recovery. The ceasefire is temporary and the details remain sparse,” he said.
Possible future economic and market outlook
Looking ahead, analysts expect sectors hit hardest during the conflict to lead any near-term recovery.
Yip said materials and technology stocks could outperform during the relief rally, while energy stocks may give back earlier gains as supply fears ease.
Neil Shearing, group chief economist at Capital Economics, said that if the ceasefire holds, oil prices could decline but still end the year at $80 per barrel.
“In that scenario, oil prices decline but still end the year at $80pb, headline inflation rises to around 3-4% y/y in the US and Europe, and while GDP growth slows in most major economies, the overall economic damage outside of the region remains limited,” he said.
He added that current expectations for rate hikes may prove excessive.
“If energy prices stabilise and growth holds up better than feared, central banks are unlikely to deliver the tightening now priced into markets,” which could pull down bond yields and support equities.
“Equity markets are likely to ebb and flow according to developments in the talks over the next couple of weeks, but in our baseline scenario, a recovery in risk appetite pushes the S&P 500 above 7,000 by the middle of the year,” he said.
For now, markets appear to be pricing in cautious optimism, with the trajectory of the next two weeks likely to determine whether the current rally marks the start of a sustained recovery or a temporary respite in an otherwise volatile landscape
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