Oil prices dropped sharply on Tuesday after U.S. President Donald Trump agreed to a two-week ceasefire with Iran, raising hopes that more oil tankers could soon pass through the key Strait of Hormuz.
However, analysts warned that questions remain, including what will change regarding the effective blockade of the strait, through which about 20% of the world’s oil passes, and whether the ceasefire will lead to a long-term end to the war, CNN reports.
U.S. oil futures fell by more than 15% after trading hours to below $95 per barrel — a significant drop, but still well above the $67.02 recorded on February 27, before the war began. Brent crude futures, the global benchmark, fell by 13.75% to $94.68.
Meanwhile, U.S. stock futures and Asian markets rose sharply. Dow futures increased by more than 1,000 points, or about 2.2%, the S&P 500 rose by 2.4%, while the Nasdaq gained around 3% in after-hours trading.
On Wednesday morning, Japan’s Nikkei 225 index rose by 4.9% as of 10:41 a.m. local time, while South Korea’s Kospi gained 5.7%. Hong Kong’s Hang Seng index increased by 2.8%.
“The market has been hungry for good news, but it remains to be seen whether the Strait of Hormuz will fully reopen,” said Bob McNally, founder and president of Rapidan Energy Group, to CNN. “This is the core issue, and so far Washington and Tehran seem to be talking past each other on it.”
While Trump celebrated on social media, Iran emphasized that the ceasefire was only temporary. “This is not the end of the war, but all military branches must follow the Supreme Leader’s order and cease fire,” a statement read on state channel IRIB.
Still, the rise in stocks and the drop in oil prices sent an “extremely clear” message, said Art Hogan, chief market strategist at B. Riley Financial, to CNN: “Investors want the Strait of Hormuz to reopen and this conflict to be behind us.”
Trump agreed to the ceasefire less than two hours before his 8:00 p.m. (ET) deadline to destroy an “entire civilization.” He said the agreement depended on reopening the Strait of Hormuz.
“We received a 10-point proposal from Iran and believe it is a workable basis for negotiations,” Trump wrote on Truth Social on Tuesday evening.
The war in the Middle East — and the effective closure of the Strait of Hormuz — has caused the largest oil supply shock in history, affecting around 12 to 15 million barrels of oil per day. Both futures and physical oil markets had signaled serious warnings.
But whether the strait can simply return to normal operations remains uncertain. Iran also declared victory and said its military would regulate passage through the Strait of Hormuz, which would give it a “unique economic and geopolitical position,” according to a statement from the Secretariat of the Supreme National Security Council.
The ceasefire “has not really clarified anything regarding the Strait,” said Patrick De Haan, head of petroleum analysis at GasBuddy, on X on Tuesday.
And the long-term effects will take time to understand.
“Beyond the short term, the ruling regime in Iran has (likely) strengthened its political control and demonstrated its ability to bring global oil and gas markets to their knees…,” wrote Karl Schamotta of Corpay Currency Research in a note on Tuesday evening.
