Iran ceasefire agreement reached: futures surge, oil prices plummet—Market Highlights

Investing.com - After the U.S. and Iran reached a temporary ceasefire agreement lasting more than a month, U.S.-index futures surged sharply. Iran agreed to allow tankers to safely pass through the Strait of Hormuz, easing some concerns about a global energy supply shortage, which led to a steep drop in crude oil prices. With the U.S. dollar weakening, gold also regained some ground. But Shell cut its first-quarter natural gas production outlook and warned that uncertainty stemming from the conflict remains.

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1. Futures jump sharply

On Wednesday, U.S. stock index futures rose sharply, reflecting investors’ relief at the ceasefire deal, which prevents a war in the Middle East that could wreak economic damage.

As of 03:19 a.m. Eastern Time (15:19 Beijing time), the Dow Jones futures contract jumped 1,076 points, or 2.3%; S&P 500 futures rose 168 points, or 2.5%; and Nasdaq 100 futures surged 799 points, or 3.3%.

Wall Street’s major stock indexes were mostly lackluster in the prior trading session, as traders watched tensely for the U.S.’s impending deadline—ultimately avoided—demanding Iran reopen the Strait of Hormuz, or face devastating military strikes. Earlier Tuesday, U.S. President Donald Trump said that if his demands weren’t met, the U.S. would destroy Iran’s “civilization,” sparking debate over whether this was the kind of inflammatory rhetoric Trump is known for or a real threat.

In the end, under mediation in Pakistan, both sides reached an agreement at the last moment—greeted by markets. In addition to the sharp rally in global stock markets and the slide in oil prices, U.S. government bonds also bounced, as investors once again priced in the possibility that the Federal Reserve could cut rates again later this year. Previously, rate-cut expectations for 2026 had nearly been fully erased, amid fears that an energy shock from the war could worsen inflation pressures.

In a report, analysts at Vital Knowledge said stocks that benefit from the conflict—such as energy companies, bulk chemical producers, and defense contractors—“may face aggressive profit-taking,” while non-essential consumer stocks “should see the largest gains.”

2. U.S.-Iran ceasefire deal takes center stage

In a post on social media, Trump said the agreement was reached after conversations with Pakistani leaders. Pakistan has recently been acting as a mediator between the U.S. and Iran. As Pakistan urged Trump to drop the last deadline of 8:00 p.m. Eastern Time on Tuesday, the president promised to pause attacks on Iran for two weeks.

Iran’s Foreign Minister Abbas Araqchi also said that if shipping is coordinated with Iran’s military, Tehran will “cease its defensive operations” and make “safe passage” through the Strait of Hormuz possible. Pakistan’s Prime Minister Shehbaz Sharif invited U.S. and Iranian officials to Islamabad for talks on Friday.

In a statement, Israeli Prime Minister Benjamin Netanyahu’s office said Israel supports Trump’s decision. Israel carried out a joint attack on Iran with the U.S. in late February. However, the statement did not mention Lebanon, where Hezbollah—an Iran-allied group—has been a target of Israel’s strikes.

The agreement leaves some room to work out a longer-term peace arrangement, although analysts at BCA Research noted that “the short-term easing of the Iran conflict will not eliminate medium-term and strategic tensions.”

3. Oil falls below $100 per barrel

After the deal was reached, oil prices plunged, falling below the $100-per-barrel level, though they still remain far above pre-war levels.

As of 03:44 a.m. Eastern Time (15:44 Beijing time), global benchmark Brent crude futures were down more than 13% to $94.85 per barrel, while U.S. WTI crude futures fell 14.8% to $96.23 per barrel.

Before the conflict erupted in late February, Brent crude had been hovering around $70 per barrel. After the offensives began, crude prices briefly surged to around $120 per barrel, sparking widespread concerns that rising inflation pressures could weigh on global growth.

Driving the price surge was the Strait of Hormuz, a narrow waterway near Iran’s southern coast through which about one-fifth of the world’s oil flows. Tehran effectively imposed a blockade on the strait, nearly cutting off key energy supplies to countries worldwide.

Asian countries that rely heavily on importing oil through this route were especially affected. Meanwhile, attacks on energy infrastructure in the Persian Gulf further disrupted the transport of natural gas to Europe. Although the U.S. is a net oil exporter, gas pump prices still rose as global oil costs increased.

In a report, ING analysts said that now all eyes are on whether tanker shipments through the Strait of Hormuz start to recover.

They wrote: “A significant increase in shipping volumes will further push down oil prices and reverse the stagflationary investment trend that has emerged in the market over the past month.” Stagflation refers to an economic trend of stubborn inflation and stagnant growth.

4. Gold climbs; the dollar slides

On Wednesday, as the ceasefire prompted a reassessment of near-term risks, gold prices rose to a nearly three-week high.

As of 03:57 a.m. Eastern Time (15:57 Beijing time), spot gold was up 2.4% to $4,818.63 per ounce, after previously touching the highest level since March 19. U.S. gold futures for June delivery rose 3.4% to $4,843.57 per ounce.

Despite gold’s traditional appeal as a safe-haven asset, during the conflict it largely performed weakly. The surge in oil prices sparked inflation concerns and increased expectations that the Federal Reserve could keep interest rates high for longer—which poses a potential headwind for non-yielding assets like gold.

By contrast, investors flocked to the U.S. dollar, further weakening gold’s appeal, since it raises the cost for overseas buyers to purchase gold. But given fresh hope that hostilities in the Middle East have ended, an index tracking the U.S. dollar against a basket of currencies fell by more than 1% at last.

5. Shell cuts natural gas production outlook sharply, warns of uncertainty tied to the war

Even though the market is scrambling to adjust its positions after the ceasefire, some analysts say the impact of the fighting could last throughout this year.

On Wednesday, energy giant Shell offered a possible glimpse into this effect, cutting its first-quarter natural gas production outlook and expecting that near-term liquidity will be hit—despite expectations that oil trading profits will rise.

In its quarterly trading update, the U.K. company said working capital (a measure of short-term liquidity) is now expected to fluctuate between negative $10 billion and negative $15 billion, mainly due to the huge swings in recent crude oil prices hitting inventories.

Shell added that, given the situation in the Middle East is continuing, its financial outlook “faces greater uncertainty.” Shell’s London-listed shares fell more than 6%.

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