Oil price falls sharply as stocks surge upon Iran ceasefire and Strait of Hormuz reopening

Global markets rallied on Wednesday as oil prices dropped sharply following news of a temporary ceasefire between the United States and Iran.

US President Donald Trump said he had agreed to suspend attacks on Iran for two weeks, raising hopes that oil and gas flows through the Strait of Hormuz could resume.

The key shipping route carries around one-fifth of the world’s energy supply.

Iran confirmed it would halt its attacks if strikes against it stopped, and said safe transit through the strait would be possible during the ceasefire period.

According to Reuters, oil prices reacted immediately as US crude futures fell about 16.5 percent to $94 a barrel, while S&P 500 futures jumped more than two percent and the US dollar weakened.

Markets had been under pressure since the conflict escalated earlier this year, with oil prices surging as much as 50 percent in March.

“Markets have been predicting that Trump was looking for an off-ramp in Iran,” said Jamie Cox of Harris Financial Group, adding: “Today, he got one and took it.”

Analysts said the ceasefire could mark a turning point, though uncertainty remains: “It’s a good start and could pave the way to a more permanent reopening – but lots of ifs still to work out,” IG analyst Tony Sycamore wrote in a note.

Trump said a longer-term peace agreement was being negotiated, describing Iran’s proposal as “a workable basis to negotiate.”