Oil prices plunged and U.S. stock futures soared Tuesday evening after President Donald Trump announced “a double sided ceasefire” in the war with Iran at the request of Pakistan, which has been serving as an intermediary for the two nations.
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Trump said on social media that the ceasefire was subject to “the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.” Israel also agreed to abide by the two-week ceasefire, a White House official told NBC News.
The price of U.S. crude oil slid more than 16% to below $94 per barrel, a stunning drop after it traded as high as $117 earlier in the day.
S&P 500 futures also soared, rising more than 2.5%, while Dow futures spiked by 1,000 points and Nasdaq 100 futures jumped nearly 3%.
Futures that track the Russell 2000 index rose 2.8%.
The price of natural gas, wholesale gasoline and heating oil, which is a proxy for jet fuel, also traded sharply lower on the news of a potential ceasefire.
U.S. crude oil is still up more than 70% since the year began, even after Tuesday night’s sharp drop.
Since the beginning of March, marine traffic through the Strait of Hormuz has been effectively halted as tankers hesitated to wade into a narrow waterway so close to the Iranian coast. Ships have also been threatened and struck with drones and projectiles.
Normally, the Strait of Hormuz carries more than 20% of the world’s oil supply to the global market.
As a result, markets had been on edge all day, watching and parsing headlines to determine whether a pause would be announced or whether the war would escalate.
In a response to Trump’s announcement, Iran’s foreign affairs minister, Seyed Araghchi, wrote on X, “For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration of technical limitations.”
It was not clear whether Iran was committing to let any ship pass and what, if any, tolls would be exacted for passage through the strait.
The Trump administration has insisted since the war started that U.S. gas prices will fall quickly as soon as the fighting stops and the Strait of Hormuz reopens.
The average price per gallon of retail gasoline was $4.14 Tuesday. The price of diesel fuel was $5.64 on average, nearing its all-time high of $5.82 in 2022.
But a two-week ceasefire most likely means “another two weeks of status quo and barely anything getting through the Strait, which is likely to continue to push oil, gasoline, diesel and jet fuel prices higher yet,” GasBuddy analyst Patrick De Haan wrote on X following Trump’s announcement.
U.S. Treasury yields also declined on the announcement, another sign that traders are likely to be breathing at least a temporary sigh of relief.
The price of precious metals jumped along with other assets. Spot gold prices jumped 2.5%, and silver rose 4.6%.
Markets in Asia and Europe were also set to open sharply higher. Futures contracts for Japan’s Nikkei benchmark stock index pointed to a jump of nearly 3% when it opens.
