Oil prices experienced a significant decline of nearly 15% following an announcement by former President Donald Trump regarding his decision to postpone military actions against Iran. This development coincided with statements from Iran’s foreign minister indicating that the strait of Hormuz would remain open for the next two weeks under military supervision.
In a post on Truth Social, Trump revealed his intention to refrain from executing threats to target Iranian infrastructure, including bridges and power facilities, contingent upon Tehran agreeing to a two-week ceasefire and the reopening of the strait. This announcement came shortly before a self-imposed deadline.
Subsequently, Iran’s national security council confirmed its acceptance of a ceasefire, provided that attacks on the country ceased. The Iranian government also indicated that peace talks with the United States would commence in Islamabad on Friday.
The financial markets reacted positively to the news, yet the ultimate results of the U.S.-Iran discussions remain uncertain. Furthermore, the management of the strait after the two-week period is still to be clarified.
Brent crude oil, which serves as the global benchmark, fell by 14.4% to $93.48 per barrel, while U.S. crude oil futures dropped 14.7% to $96.27. Despite the decline, prices remain considerably higher than they were prior to the onset of the conflict.
In the Asian markets, trading began on a strong note, with Australia’s S&P/ASX 200 increasing by nearly 3%, Japan’s Nikkei rising over 4%, and South Korea’s Kospi advancing by 6%. Late Tuesday, futures for the S&P 500 climbed by 2.3%, and Dow futures increased by 2%.
In the bond market, Treasury yields decreased following news of the potential ceasefire. The yield on the 10-year Treasury note dropped from 4.30% to 4.24%. Additionally, gold prices surged by more than 2%, reaching $4,812 per ounce.
Charu Chanana, the chief investment strategist at Saxo, emphasized to Reuters that the critical factor will be whether negotiations continue to progress over the next two weeks and if insurers and tanker operators regain sufficient confidence to resume normal traffic through the strait. She noted, “That will determine whether this remains just a relief rally or starts to look more like a durable de-escalation.”
Earlier in the day, U.S. stocks showed volatility during regular trading hours due to rising concerns related to the conflict with Iran. Trump had warned that “a whole civilization will die tonight” if Iran did not comply with his deadline, leading to a drop of as much as 1.2% in the S&P 500. However, stocks rebounded towards the end of the trading session after Pakistan’s Prime Minister urged Trump to extend the deadline and requested Iran to keep the strait open for the same duration.
Since the U.S. and Israel launched strikes against Iran in late February, oil prices have surged, contributing to a conflict that has persisted for over five weeks. Iran has effectively closed the strait, through which approximately 20% of global oil and liquefied natural gas is transported, leading to a worldwide energy crisis.
With contributions from the Associated Press.
