A sweeping relief rally swept through global financial markets on Wednesday after the United States and Iran agreed to a conditional two-week ceasefire, triggering the sharpest single-day fall in oil prices since 2020 and sending equity indices surging across Europe, Asia and the Americas. Analysts, however, are warning that markets may have moved far ahead of the underlying reality.
US crude benchmark West Texas Intermediate tumbled 16.4 percent to settle at $94.41 per barrel, its largest one-day decline since April 2020, while Brent crude fell 13.3 percent to $94.75 a barrel. On equity markets, the Dow Jones Industrial Average surged 1,325 points, while the S&P 500 closed up 2.5 percent and the Nasdaq Composite gained 2.8 percent. Germany’s DAX index jumped more than 5 percent and Europe’s Stoxx 600 climbed 3.8 percent.
The ceasefire, announced by US President Donald Trump less than two hours before an 8 p.m. deadline he had set for Iran to reopen the Strait of Hormuz or face further strikes, was framed as contingent on Tehran allowing safe passage through the waterway. The Strait carries roughly one-fifth of global oil flows and had been effectively blockaded since the conflict escalated in late February, triggering what the International Energy Agency described as the largest supply disruption in the history of the global oil market.
Despite the market euphoria, physical shipping through the Strait has barely resumed. Ship tracking data from Kpler showed only five vessels crossing the strait on Wednesday and seven on Thursday, while more than 600 vessels including 325 tankers remained stranded in the Gulf. The UAE’s state oil company chief, Sultan Ahmed Al Jaber, said the Strait was not genuinely open, describing access as being restricted, conditioned and controlled, and warning that Iran’s management of passage amounted to coercion rather than freedom of navigation.
Analysts were blunt about the gap between market pricing and ground-level conditions. Bob McNally, founder of Rapidan Energy Group, said the market had been eager for good news but that it remained to be seen whether the Strait of Hormuz would open fully, describing it as the whole ball of wax and noting that Washington and Tehran appeared to be talking past each other on that central question.
Josh Rubin, portfolio manager at Thornburg Investments, cautioned against reading the early market reaction as a definitive verdict, warning that limited visibility and low predictability remained, and that tail risks were significant if the Strait stayed closed for another two to four months. Analysts at BCA Research said energy and commodity markets were likely to remain on a structurally higher floor regardless of the ceasefire outcome, as governments stocked up in anticipation of renewed conflict.
Nigel Green, Chief Executive Officer of deVere Group, one of the world’s largest independent financial advisory organisations, argued the rally reflected relief rather than resolution and carried obvious risks. He described oil prices below $95 as sitting on top of unresolved risk, noting that a single escalation point in the Strait could send prices sharply higher again within days and that the structural drivers of volatility across the region had not been removed, only deferred.
Oil analyst Jason Schenker of Prestige Economics said almost anything going wrong in ceasefire talks could quickly put oil back above $100 per barrel, reflecting how thin the margin for error remains even after the ceasefire announcement.
Complicating the picture further, oil prices remain well above pre-war levels, with Brent still more than 30 percent above the approximately $73 per barrel at which it was trading before the conflict began in late February, and WTI more than 40 percent above its pre-war level, even after the ceasefire-driven selloff.
The talks scheduled to begin in Islamabad between US and Iranian delegations cover nuclear material, sanctions relief, and longer-term security arrangements. The outcome of those discussions, rather than the temporary ceasefire itself, will determine whether this week’s market move holds or reverses.
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