Oil prices fell sharply on Wednesday, while stock markets surged globally, following reports of a two-week ceasefire agreement between US President Donald Trump and Iran. This development raised hopes that more oil tankers could soon resume transit through the Strait of Hormuz.
The US crude benchmark, West Texas Intermediate (WTI), plunged by 16% to around $95 per barrel—still significantly higher than its pre-conflict trading level of $67. The global crude benchmark, Brent futures, dropped by 13.5% to $94 per barrel.
Despite the sharp market movements, uncertainty remains over the ceasefire, particularly regarding when shipping through the Strait of Hormuz might resume. Approximately 20% of the world's oil supply typically passes through this vital waterway.
"Markets have been eager for positive news, but it remains to be seen whether the Strait of Hormuz will fully reopen," said Bob McNally, founder and president of Rapidan Energy Group, in a statement to CNN.
The ceasefire news also sparked a rally in global equity markets. In Asia, South Korea's KOSPI led gains, closing up 6.87%. Japan's Nikkei Index and Hong Kong's Hang Seng Index rose by 5.39% and 3.09%, respectively.
In European markets, Germany's DAX index jumped 4.5% in early trading, while stock indices in Paris and London also posted notable gains. US stock futures indicated a strong opening.
"For markets, the key issue remains the transit situation in the Strait of Hormuz," wrote Neil Shearing, Group Chief Economist at Capital Economics, in a report. He added, "Significant obstacles still need to be overcome before the ceasefire between the US, Israel, and Iran translates into a permanent end to the war."
Comments