Iran war: Price of oil tumbles as global stocks rebound on two-week ceasefire
The price of oil plunged and global stock markets recovered sharply after the US and Iran agreed a two-week ceasefire.
The conditional ceasefire deal includes reopening the important Strait of Hormuz waterway. Traders and investors welcomed the deal on Wednesday morning after a volatile six weeks for the financial markets since the conflict began.
London’s FTSE 100 index of major firms jumped by as much as 2.6% at the start of trading as a result. It came as the price of benchmark Brent crude oil slid by 14.3% to 93.6 US dollars (£69.78) a barrel as a result.
Nevertheless, prices remain significantly higher than before the conflict began, when Brent had sat at around 70 dollars a barrel.
Petrol and diesel prices for UK motorists have shot higher as a result. The ceasefire followed threats by President Donald Trump on Tuesday that “a whole civilisation will die” unless Tehran met his demands. Less than two hours before his deadline passed for Iran to agree a deal, the US president said he was suspending his threat to widen the military offensive to power plants and bridges, subject to the strait reopening.
Stock markets roundly welcomed the news, with key Asian indexes such as Japan’s Nikkei 225 and South Korea’s Kospi rising by more than 5%. European markets also opened positively.
Experts have suggested that the ceasefire may drive hopes that the increases in the cost-of-living are not “as painful” as many have been expecting.
Susannah Streeter, chief investment strategist at Wealth Club, said: “A wave of relief has hit financial markets after threats of a devastating escalation of the war were replaced by a temporary truce.
“The FTSE 100 has jumped on the open, on the back of sharp gains for indices in Asia. The two-week ceasefire is likely to be fraught with uncertainty but for now there are hopes that it will be a precursor to a longer-lasting agreement. There is a chance that the cost-of-living crisis consumers are already having to deal with may not be quite as painful.”
Josh Gilbert, market analyst for eToro, said: “Ultimately, it’s important that investors don’t get ahead of themselves. We’ve seen Trump set and extend deadlines multiple times before, and a two-week window is not a permanent resolution. The rally in risk assets makes sense on the headline, but it will need to be backed up by tangible progress in negotiations to hold.”
It has also been revealed that Shell has reduced its gas production outlook for the first quarter of 2026 after being impacted by the conflict in the Middle East.
The energy giant trimmed its guidance for integrated gas production after volumes from Qatar were particularly impacted during recent attacks.
Last month, Shell’s PearlGTL site in Qatar stopped production after being hit during attacks while LNG facilities in the country partly owned by Shell have also been impacted.
The FTSE 100 firm pointed to gas production of 880,000 to 920,000 barrels of oil equivalent per day (BOED), for the latest quarter. It had previously predicted this would be between 920,000 and 980,000 BOED, and it would represent a slump from 948,000 in the final quarter of last year. Meanwhile, Shell said trading from its chemical and products business, which includes oil trading, is expected to be “significantly higher” than in the previous quarter after a jump in energy prices.