Global Oil Prices Plunge as US and Iran Agree to Temporary Ceasefire, Stock Markets Rally

Global oil prices experienced a sharp decline and stock markets surged following the announcement of a conditional two-week ceasefire deal between the United States and Iran, which includes the reopening of the strategically vital Strait of Hormuz. Benchmark Brent crude fell approximately 13% to $94.80 (£70.73) per barrel, while US-traded oil dropped more than 15% to $95.75 per barrel. Despite the retreat, prices remain significantly above pre-conflict levels; on 28 February, Brent was trading around $70 a barrel.

Energy costs had skyrocketed as supplies from the Middle East were severely disrupted after Iran threatened to target ships using the strait in retaliation for US and Israeli airstrikes. In response to the ceasefire news, major stock indexes across the Asia-Pacific region jumped on Wednesday morning. Japan’s Nikkei 225 surged 5%, South Korea’s Kospi climbed nearly 6%, Hong Kong’s Hang Seng increased by 2.8%, and Australia’s ASX 200 rose 2.7%. US stock market futures also indicated a higher opening for Wall Street. Futures contracts, which represent agreements to buy assets at set prices at a later date, can provide an early signal of market direction before official trading begins.

On Tuesday evening, former US President Donald Trump posted on social media, stating, "I agree to suspend the bombing and attack of Iran for a period of two weeks... subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz." He had previously issued a hard deadline of 20:00 EDT on Tuesday (00:00 GMT on Wednesday), warning that "a whole civilisation will die tonight" if no agreement was reached. Iranian Foreign Minister Abbas Araghchi responded on social media that Tehran would consent to a ceasefire "if attacks against Iran are halted," adding that safe passage through the Strait of Hormuz "will be possible."

Despite his aggressive rhetoric, Trump was reportedly cautious about escalating the conflict in a way that could send energy prices "skyrocket[ing]," according to Xavier Smith of market research firm AlphaSense. Smith noted that a surge in energy costs could have inflicted a "self-inflicted economic wound" that few would risk, especially amid pressures on Trump’s approval ratings. Saul Kavonic from MST Marquee added that the ceasefire could allow more oil tankers stranded near the strait to resume passage, providing some short-term relief for markets.

Even amid the conflict, some ships have been able to navigate the Strait of Hormuz, though volumes remain well below normal. Asian nations such as India, Malaysia, and the Philippines had negotiated safe passage for their vessels in recent weeks. China also confirmed that several of its ships have crossed the strait since hostilities began. Additionally, a Malta-flagged container vessel owned by French company CMA CGM successfully transited the waterway, confirmed by media organisation BFM TV, which is owned by the shipping company. A Japanese natural gas carrier similarly completed a passage, according to shipping giant MOL.

Kavonic cautioned, however, that while a ceasefire is in place, full restoration of energy production in the Middle East is unlikely until a durable peace agreement is established. Restarting production could take months due to damage to energy infrastructure in the region. Iran has targeted energy and industrial facilities across the oil-rich region in retaliation for US-Israeli strikes, with repair costs estimated to exceed $25 billion, according to research firm Rystad Energy.

Energy markets were further disrupted in mid-March following strikes on Qatar’s Ras Laffan industrial hub, which produces about a fifth of the world’s liquefied natural gas. The attacks reportedly reduced the country’s export capacity by 17% and are expected to take up to five years to fully repair. The economic fallout has hit Asia particularly hard, given the region’s heavy reliance on Gulf energy supplies. Governments and companies across Asia have implemented measures to cope with rising energy prices and fuel shortages. On 24 March, the Philippines—importing 98% of its oil from the Middle East—declared a national energy emergency after petrol prices more than doubled. Airlines in the region have raised fares and reduced flights in response to surging jet fuel costs.

Ichiro Kutani from Japan’s Institute of Energy Economics observed, "Developing countries in Asia have been especially affected by the conflict as many do not have their own refineries or sufficient oil reserves. The ceasefire is good news for Asian countries. If it holds, oil prices will return to normal states, though this will take time."

The ceasefire deal, while temporary, has already provided a welcome reprieve to markets and energy-dependent nations. However, analysts warn that substantial recovery of production and full stability in oil prices will require both confidence in a lasting peace and extensive repair of damaged infrastructure across the region.

By fLEXI tEAM