Oil prices tumbled over five percent on Tuesday after Israel confirmed it had agreed to a ceasefire proposal from U.S. President Donald Trump, signalling a potential end to its 12-day conflict with Iran. The development eased fears of a wider energy crisis, boosting investor confidence across global markets.
Brent crude fell 5.2% to $67.75 per barrel, while U.S. benchmark West Texas Intermediate (WTI) dropped 5.4% to $65.01 around 06:50 GMT. The dramatic dip effectively reversed nearly all the gains recorded since the conflict erupted.
“A potential end to the conflict has been welcomed by market participants,” said Lee Hardman of MUFG. “Brent has now almost fully reversed all of the gains since the conflict started.”
The foreign exchange market also responded, with the U.S. dollar giving back recent gains amid expectations that geopolitical risks in the Middle East may no longer be a key market driver. Analysts suggest the dollar could continue weakening if tensions remain subdued.
Oil prices had briefly surged on Monday after Iran hinted at disrupting transport through the Strait of Hormuz in retaliation for U.S. strikes on its nuclear facilities. However, markets steadied after Iran’s retaliatory missile attack on a U.S. base in Qatar left key oil infrastructure untouched.
“Tehran played it cool,” said Stephen Innes of SPI Asset Management. “Their 'retaliation' was loud enough for headlines, quiet enough not to shake the oil market’s foundations. Once that became clear, the war premium came crashing out of crude.”
The Israeli government declared it had achieved all its strategic objectives in the conflict, claiming to have neutralized what it described as an “immediate dual existential threat” — referring to Iran’s nuclear and ballistic capabilities. It warned, however, that any violation of the ceasefire would be met with a strong response.
Global Markets React Positively
The easing tensions prompted gains in equity markets across Asia and Europe. Tokyo’s Nikkei closed 1.1% higher, Shanghai added 1.2%, and Hong Kong’s Hang Seng rose 2.1%. Seoul surged 3.0%, while Taipei and Jakarta gained 2.1% and 1.3% respectively. Sydney’s ASX closed up 1.0%.
European markets followed suit, with Paris up 1.5%, Frankfurt gaining 1.8%, and London’s FTSE 100 rising 0.7%, though gains in the UK were tempered by falling shares in oil giants Shell and BP.
Australian airline Virgin Australia made a notable comeback, soaring on its return to the local stock exchange after recovering from near-bankruptcy more than four years ago.
Forex and Fed Expectations
In currency markets, the U.S. dollar weakened after Federal Reserve Governor Michelle Bowman signalled support for an interest rate cut at the Fed’s July meeting—provided inflation remains stable. Market sentiment now anticipates further rate cuts as early as September.
Bowman’s remarks, combined with easing geopolitical risks, helped lift the euro and pound, with the euro rising to $1.1609 and the pound climbing to $1.3586.
Key Market Figures (as of 07:00 GMT):
- Brent Crude: Down 5.2% at $67.75
- WTI Crude: Down 5.4% at $65.01
- Nikkei 225 (Tokyo): Up 1.1% at 38,790.56
- Hang Seng (Hong Kong): Up 2.1% at 24,181.94
- Shanghai Composite: Up 1.2% at 3,420.57
- Euro/Dollar: $1.1609
- Pound/Dollar: $1.3586
- Dollar/Yen: 145.05
- Dow Jones (New York): Up 0.9% at 42,581.78
- FTSE 100 (London): Up 0.7% at 8,816.78
With tensions easing, investors are now watching closely to see whether the ceasefire holds—and whether central banks around the world will shift focus from conflict-driven volatility to underlying economic fundamentals.