Oil Crashes 15% as US-Iran Ceasefire Reopens Hormuz
Brent crude plunges to $94 after two-week truce announced. S&P 500 futures jump 2.7% on relief rally as Strait of Hormuz reopens to shipping.
The deadline produced a deal.
Less than two hours before President Trump's ultimatum to strike Iranian infrastructure expired Tuesday night, negotiators announced a two-week ceasefire. The agreement includes immediate reopening of the Strait of Hormuz to commercial shipping—the central demand that had kept oil above $110 for weeks.
Oil prices collapsed on the news. Brent crude fell 13.8% to $94.13 per barrel. West Texas Intermediate dropped 16.3% to $94.55. That's the largest single-day decline since the pandemic selloff in 2020.
The Terms
Iran agreed to safe passage through the Strait of Hormuz during the ceasefire period. In exchange, the U.S. paused military operations against Iranian infrastructure. The two-week window is meant to allow negotiations on a permanent resolution covering sanctions relief, the strait, and Iran's nuclear program.
This follows the framework we've tracked throughout the conflict. The difference: previous deadlines produced extensions, not agreements. This time, both sides signed.
Trump called it "a tremendous step toward peace" in a late-night statement. Iranian officials described it as a "necessary pause" while emphasizing their demands for war damage compensation remain on the table.
Market Reaction
Global markets responded with the strongest relief rally since the war began February 28.
| Index | Change |
|---|---|
| S&P 500 Futures | +2.7% |
| Nasdaq 100 Futures | +3.5% |
| Dow Futures | +2.5% (~1,000 pts) |
| Nikkei 225 | +5.4% |
| Kospi | +6.9% |
Asian markets posted their biggest gains in years. Japan's Nikkei jumped 5.4% to close at 56,308. South Korea's Kospi soared 6.9%—the strongest session since the 2022 bear market bottom.
The dollar weakened to a one-month low. Gold rose despite the risk-on tone. Bonds rallied hard, with UK benchmark yields dropping 22 basis points.
What Changes
The oil shock has dominated market action since late February. Brent traded above $100 for most of March, briefly touching $117 Tuesday before the ceasefire news broke. Energy stocks led the market while everything else struggled.
That trade reverses now—at least temporarily. Energy names will give back gains. Rate-sensitive sectors should catch a bid as inflation fears ease. The Fed has more room to maneuver if oil stabilizes in the $90s.
But the ceasefire is two weeks, not permanent. Traders who chased the rally overnight are betting negotiations succeed. If talks collapse and the shooting resumes, we're back to $115 oil and worse.
The Larger Picture
This war has cost the global economy roughly one billion barrels of lost oil supply. Diesel prices remain elevated. Shipping routes through the Persian Gulf still carry risk premiums. And Iran's demands for compensation—billions of dollars—haven't been addressed.
The oil price surge we covered yesterday reflected genuine supply disruption, not just headline risk. Reopening the strait helps, but it doesn't undo the damage already done to global energy infrastructure.
For now, though, markets are taking the win. Futures point to the strongest open since November. Whether it holds depends on what happens over the next fourteen days.