Oil Plunges as U.S.–Iran Ceasefire Deal Boosts Risk Appetite

Key Takeaways:

• Oil drops more than 15% as ceasefire agreement eases supply fears

• U.S. and Iran accept two-week truce mediated by Pakistan

• Strait of Hormuz reopening reduces geopolitical risk premium

• Markets shift from supply shock fears to short-term normalization

Market Summary:

Global risk sentiment improved markedly as crude oil prices plunged by more than 15%, following a breakthrough in ceasefire negotiations between the United States and Iran.

During early Asian trading hours, both countries agreed to a two-week ceasefire proposal facilitated by Pakistan, signaling a temporary de-escalation in tensions that had previously threatened global energy supply. The agreement includes conditions tied to the reopening of the Strait of Hormuz, a critical route that accounts for roughly 20% of global oil shipments.

Donald Trump confirmed that the United States would suspend planned military actions for the duration of the truce, citing constructive discussions and meaningful progress toward a broader agreement. He also indicated that both sides are working toward finalizing a longer-term resolution, with key areas of disagreement reportedly narrowing.

The sharp decline in oil prices reflects a rapid unwinding of the geopolitical risk premium that had previously driven prices higher amid fears of supply disruption. With the prospect of restored energy flows, market participants have shifted from pricing in worst-case scenarios toward expectations of short-term stabilization.

However, despite the initial optimism, uncertainty remains. The ceasefire is temporary, and the durability of any long-term agreement is still unclear. As a result, oil markets are likely to remain volatile, with traders continuing to monitor developments closely for confirmation of sustained de-escalation.