U.S. President Donald Trump announced on Tuesday that he had agreed to a two-week ceasefire with Iran, suspending planned attacks on Iranian infrastructure. The move came less than two hours before a deadline Trump had set for Iran to reopen the Strait of Hormuz or face widespread attacks. In exchange, Iran agreed to allow safe passage through the strait for two weeks, though it emphasized that the ceasefire did not signify an end to the war.
Market Reactions
The announcement triggered significant market reactions. Oil prices plummeted, with U.S. crude falling over 18% to under $93 a barrel, marking the largest one-day drop since the Gulf War in 1991. Brent crude also fell about 6% to $103.40. Stock futures surged, with Dow futures rising 1,000 points, Nasdaq 100 futures up nearly 3%, and S&P 500 futures gaining over 2.5%. Bond yields eased, with the 10-year Treasury yield dropping to 4.24% from 4.30% earlier in the day.
Diplomatic Efforts
Pakistan played a key role in mediating the ceasefire. Pakistani Prime Minister Shehbaz Sharif urged Trump to extend the deadline, proposing a two-week ceasefire to allow diplomacy to proceed. Iran’s Supreme National Security Council accepted the ceasefire and said negotiations with the U.S. would begin in Islamabad on Friday. Trump noted that Iran had submitted a 10-point proposal, which he described as a workable basis for negotiations.
Investor Perspectives
Investors and analysts offered mixed reactions. Some saw the ceasefire as a positive step, reducing the risk of a prolonged conflict and its economic impact. Others remained cautious, noting that the conflict could reignite quickly and that oil prices might remain elevated, complicating central bank decisions on interest rates. Gold prices extended gains, reflecting ongoing uncertainty.
Long-Term Implications
The ceasefire is conditional on Iran’s compliance with reopening the Strait of Hormuz. If successful, it could pave the way for a lasting peace agreement. However, the situation remains volatile, with both sides emphasizing their readiness for either peace or continued conflict.