Markets rally on US-Iran ceasefire hopes as oil prices plunge
Global equities surge and energy costs drop as investors price in a potential deal to reopen the Strait of Hormuz, despite White House denials and unresolved nuclear and regional security issues.
Global financial markets surged on Wednesday as renewed speculation that the United States and Iran are nearing a ceasefire agreement drove oil prices sharply lower and pushed US equity indices toward record highs. The rally was triggered by reports from Iran’s state broadcaster that Tehran had obtained a preliminary framework document outlining a potential deal, which allegedly included Iran allowing traffic through the Strait of Hormuz at pre-war levels within 30 days and the US lifting its naval blockade on Iranian ports.
The price of US crude fell 5.5 per cent to settle at $88.68, while Brent crude, the international oil benchmark, decreased to $92 after trading above $100 last week. The S&P 500 rose 0.1 per cent, adding to an all-time high set on Tuesday, while the Dow Jones Industrial Average climbed 243 points, or 0.5 per cent, with an hour remaining in trading. The Nasdaq composite also posted a modest 0.1 per cent gain.
Despite the White House dismissing the report of the preliminary document as a “complete fabrication,” market prices remained subdued, reflecting investor optimism that an agreement would ease supply concerns and soothe deep uncertainty afflicting the global economy. The strength of the current surge suggests that market participants believe the two parties may be closer than ever to reaching a resolution, even though such rallies have historically been followed by slumps when negotiations fail to deliver.
US President Donald Trump indicated during a Wednesday cabinet meeting that while officials were not yet satisfied with the agreement, he believed progress was being made. “I think they’re starting to give us the things that they have to give us,” Trump said. He further noted that if Iran failed to comply, Defense Secretary Pete Hegseth would be the figure to “finish them off,” highlighting the military dimension underpinning the diplomatic efforts.
Significant hurdles remain, including the fate of approximately 440 kilograms of highly enriched uranium, the dismantling of Iran’s nuclear infrastructure, and Tehran’s ballistic missile programme. It is also unclear whether a halt in hostilities in Lebanon would be included in any potential deal, a condition insisted upon by Iranian officials. Complicating the regional security landscape, Israeli Prime Minister Benjamin Netanyahu has ordered the Israeli military to step up attacks against Hezbollah this week.
