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Ceasefire · Geopolitics · Oil Prices · Stock Markets
US President Donald Trump's agreement to a two-week ceasefire with Iran on Wednesday triggered a significant market reaction, with global oil prices plummeting by 14-16% and stock markets worldwide experiencing a robust relief rally, as reported by CNN.
WTI, the US crude benchmark, tumbled almost 16% to $95 a barrel, while Brent crude futures dropped 14% to $93.8 a barrel. This sharp decline follows a period where the Middle East conflict caused the biggest oil supply shock on record, choking off 12 million to 15 million barrels of crude oil daily and effectively closing the crucial Strait of Hormuz, which normally handles about 20% of the world's oil supply.
Despite the market's positive reaction, significant uncertainty persists regarding the full reopening of the Strait, with Iran and Oman reportedly planning to charge transit fees of $1-2 million per tanker, a situation Neil Shearing of Capital Economics states would add roughly $1 per barrel to oil costs and could mean a "de facto partial nationalisation" of the route. Iran's semi-official Tasnim news agency and state-run IRIB confirmed the ceasefire is temporary, and Iran's Secretariat of the Supreme National Security Council stated its military will regulate passage, solidifying its "unique economic and geopolitical standing," as noted by Karl Schamotta of Corpay Currency Research.
Bob McNally of Rapidan Energy Group highlighted that Washington and Tehran are "talking past each other" on the Strait's full opening, with 187 tankers carrying 172 million barrels of oil still stranded in the Gulf as of Tuesday, according to Kpler.
