Stocks Soar, Oil Prices Plummet Below $100 as Iran Ceasefire Triggers Global Relief Rally

Global Markets Rally as US and Iran Agree on Ceasefire

Oil futures plummeted below $100 a barrel on Wednesday, while equity and bond prices surged sharply, as the United States and Iran agreed on a two-week ceasefire, sparking hopes for the resumption of oil and gas flows through the Strait of Hormuz.

US President Donald Trump announced the ceasefire, brokered by Pakistan, just hours before his Tuesday deadline for Iran to reopen the strait, through which about a fifth of global oil and liquefied natural gas is shipped, or face devastating attacks on its civilian infrastructure. Despite Trump's claims of victory, analysts noted that Iran's continued control over the strait leaves it with significant leverage over global energy markets and Gulf rivals.

Iran stated that it would provide safe passage through the waterway if attacks against it ceased. However, on Wednesday afternoon, the country's parliamentary speaker, Mohammad Baqer Qalibaf, said that three key clauses of a 10-point proposal were violated before negotiations were set to start on Friday, making a bilateral ceasefire or negotiations unreasonable.

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Despite this, investors took a bullish stance throughout Wednesday's session, pushing the benchmark S&P 500 to its highest closing level in a month.

Market Performance

The Dow Jones Industrial Average rose 1,325.46 points, or 2.85%, to 47,909.92, while the S&P 500 gained 165.96 points, or 2.51%, to 6,782.81. The Nasdaq Composite added 617.15 points, or 2.80%, to 22,635.00. MSCI's gauge of stocks across the globe rose 32.33 points, or 3.24%, to 1,030.42.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Analysts noted that the market rally was a classic geopolitical relief trade, driven by the collapse of oil prices and the removal of tail risks. However, there is still uncertainty about the ceasefire, which is only two weeks long, and contradictions around what the Trump administration has said and what the Iranians have said about the Strait of Hormuz.

In energy markets, U.S. crude settled down 16.4%, or $18.54, at $94.41 a barrel, while Brent settled at $94.75 per barrel, down 13.3%, or $14.52. In Treasuries, the yield on benchmark U.S. 10-year notes fell 4.4 basis points to 4.299%, from 4.343% late on Tuesday, while the 30-year bond yield fell 3.1 basis points to 4.8897%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 4.1 basis points to 3.792%.

The euro rose 0.58% against the U.S. dollar to $1.1661, while against the Japanese yen, the dollar weakened 0.65% to 158.59. In precious metals, gold pared gains after touching a three-week high following the U.S.-Iran agreement. Spot gold was last up 0.44% to $4,722.97 an ounce, while spot silver rose 1.8% to $74.24 an ounce.