Global oil prices have fallen sharply and stock markets jumped after the US and Iran agreed to a conditional two-week ceasefire deal that includes the reopening of the key Strait of Hormuz waterway.
The global benchmark oil price initially sank 15% to just under $92 (£67) before climbing back up slightly while US-traded oil dropped to about $96.
However, oil prices remain higher than before the conflict started on 28 February. At the time, it was trading at around $70 a barrel.
The cost of energy has jumped as oil and gas supplies from the Middle East have been severely disrupted after Iran threatened to attack ships trying to use the strait in retaliation to US and Israeli airstrikes.
Stock markets in the US surged higher despite ongoing questions about the strength of the ceasefire deal, following sharp rises in Europe and Asia.
The S&P 500 index of the largest firms listed in the US ended the day up 2.5%, while the Dow and Nasdaq closed 2.8% higher.
In London, the FTSE 100 share index closed up 2.5%. In France, the CAC 40 ended the day 4.5% higher while Germany’s Dax had climbed 4.7%.
Japan’s Nikkei 225 closed up nearly 5.4% while South Korea’s Kospi jumped more than 6.8%. Hong Kong’s Hang Seng ended 3% higher, while the ASX 200 in Australia gained 2.5%.
In a social media post on Tuesday evening, Trump said: “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 set a deadline for 20:00 EDT on Tuesday (00:00 GMT on Wednesday), threatening that “a whole civilisation will die tonight” if no deal was reached.
Iranian Foreign Minister Abbas Araghchi said on social media that Tehran will agree to a ceasefire “if attacks against Iran are halted”, adding that safe passage through the Strait of Hormuz “will be possible”.
Despite his threats, Trump was likely to be wary about letting energy prices “skyrocket” by escalating the conflict, said Xavier Smith from market research firm AlphaSense.
That could have led to a “self-inflicted economic wound” that few would risk, especially given the looming pressure of approval ratings on Trump’s leadership, said Smith, a research director.
In recent days, some ships have passed through the Strait of Hormuz, although far fewer than usual.
If more oil tankers stranded near the strait pass through the waterway during the ceasefire it could provide some relief for markets in the coming weeks, said analyst Saul Kavonic from financial services firm MST Marquee.
But already on Wednesday there were reports that attacks in the region were continuing, which Pakistani prime minister Shehbaz Sharif said undermined “the spirit of peace process”.
Kavonic said that while a ceasefire is in place, it is still unlikely that energy production in the Middle East will fully resume until there is confidence of a lasting peace deal.
It could also take months for production to restart due to damage done to energy infrastructure in the region, he said.
Iran has targeted energy and industrial infrastructure across the oil-rich region in retaliation for the US-Israeli strikes.
Exxon said on Wednesday that its oil production in the Middle East had dropped 6% in the first three months of the year, compared with 2025, as a result of the conflict.
In Qatar, owners of the Ras Laffan industrial hub, which produces about a fifth of the world’s liquefied natural gas, have warned that attacks have reduced the country’s export capacity by 17% and that it will take up to five years to repair the damage.
All told, it could take years to fix the damage and cost more than $25bn, according to research firm Rystad Energy.
