The U.S. and Iran agreed to a two-week ceasefire on Wednesday, leading to a sharp decline in oil prices and a surge in global stock markets. Brent crude fell 14.78% and West Texas Intermediate (WTI) dropped 16.78%, marking the largest single-day drop since the COVID-19 pandemic. The ceasefire includes the reopening of the Strait of Hormuz, a critical route for global oil supplies.
Goldman Sachs revised its second-quarter 2026 oil price forecasts, lowering Brent to $90 per barrel and WTI to $87, down from previous estimates of $99 and $91, respectively. The bank cited reduced risk premiums and increased oil flows through the Strait of Hormuz. However, it warned of upside risks, including potential production losses of 2 million barrels per day, which could push Brent prices to $115 in the fourth quarter.
Global stock markets rallied on the news, with the S&P 500, Dow Jones, and Nasdaq all gaining over 2%. The energy sector was the only one in the red, with Exxon Mobil and Chevron dropping over 5%. Travel-linked stocks, such as airlines and cruise operators, saw significant gains.
Bond yields fell as traders reduced expectations for interest rate hikes. The 10-year Treasury yield dropped to 4.28%, and European debt yields fell by over 25 basis points. Analysts noted that the ceasefire could ease inflation pressures, though concerns about the truce's durability remain.
Meta Platforms announced a new AI model, Muse Spark, aiming to compete in the AI market. The company hopes the model will justify its significant spending on AI development. Meanwhile, traders placed a $950 million bet on oil prices falling just hours before the ceasefire was announced, reflecting market expectations of a price decline.
Analysts remain cautious, noting that the ceasefire is temporary and that fighting continues in the region. The reopening of the Strait of Hormuz is expected to be managed by Iran, raising questions about its long-term stability. Despite the market optimism, analysts warn that inflation fears persist, and mortgage rates are likely to remain high for some time.