The hopeful ceasefire news is fueling the flames.
Oil prices continued to fall and global stock markets surged on Tuesday amid growing optimism that the conflict between Israel and Iran would not disrupt the international oil supply. Despite signs that a fragile truce may be weakening, investor sentiment was buoyed by U.S. President Donald Trump’s statement that both nations had agreed to a “complete and total ceasefire.”
Early trading in the U.S. saw the S&P 500 rise by 0.7%, with the Dow Jones Industrial Average up by 289 points and the Nasdaq climbing 0.9%. The strongest impact was felt in the energy sector, where benchmark U.S. crude prices dropped nearly 5% to just over $65 a barrel, and Brent crude saw a similar decline. These price drops reversed much of the surge seen when the conflict began nearly two weeks ago.
Oil markets were initially rattled by concerns that the confrontation could threaten global crude supplies, particularly if Iran disrupted the critical Strait of Hormuz, a key shipping route. However, Iran’s retaliatory action appeared limited and did not target oil infrastructure, calming fears of an immediate supply crisis.
Commodities analysts suggest that with OPEC+ continuing to increase output and no major disruption to oil flow, prices could continue to ease further, especially if the ceasefire holds. This drop in oil prices may help reduce inflationary pressures, possibly giving the Federal Reserve more room to consider lowering interest rates—a move that tends to boost economic activity by making borrowing cheaper.
Still, the Fed remains cautious. While some officials have hinted at potential rate cuts, Chair Jerome Powell emphasized the importance of waiting for clearer economic signals before altering monetary policy. Meanwhile, global markets—from Asia to Europe—responded positively to the truce news, with several indices posting gains of over 1%, led by strong showings in South Korea and Hong Kong.
