Iran Ceasefire: Why Oil Prices Are Falling and Markets Are Rallying

What happened?

The US-Iran conflict had been rattling global markets since late February, when US and Israeli forces attacked Iran. In response, Tehran effectively closed the Strait of Hormuz, the narrow waterway through which approximately 20% of the world's daily oil supply normally passes.

The impact was immediate. Oil prices surged roughly 50% through March alone, the steepest monthly rise in history. Energy costs spiralled. Tankers stopped transiting the Strait. Global supply chains came under serious strain.

Then, on the evening of 7 April, Trump announced he had agreed to suspend attacks on Iranian infrastructure for two weeks, subject to Iran reopening the Strait. Iran's Supreme National Security Council accepted the terms. Iranian Foreign Minister Abbas Araghchi confirmed that safe passage through the Strait would be possible for two weeks, to be coordinated with Iranian Armed Forces.

The ceasefire emerged following intervention by Pakistan's Prime Minister Shehbaz Sharif, who urged both sides to pause and allow negotiations to continue.

How did markets react?

The market reaction was swift and dramatic across multiple asset classes.

Oil prices collapsed. West Texas Intermediate (WTI) crude fell over 16% to approximately $94 per barrel in after-hours trading, a stunning drop from the $117 it had reached earlier the same day. Brent crude, the international benchmark, fell around 15% to roughly $93 per barrel. Despite the decline, both benchmarks remain significantly above where they were at the start of the conflict.

Equity markets surged. S&P 500 futures jumped more than 2%, while Dow futures rose around 930 points. Asian markets opened sharply higher, Japan's Nikkei gained over 4% and South Korea's Kospi climbed 6%. European benchmarks were also set to open with strong gains.

Safe-haven assets held firm. Gold rose around 2.5% and silver climbed 4.6%. US Treasury yields fell, with 10-year yields dropping to around 4.25%. The fact that gold and bonds rose alongside equities signals that investors are not yet fully risk-on, this is a relief rally built on a backdrop that remains fragile.

The dollar fell broadly, reflecting reduced demand for the safe-haven currency as geopolitical risk temporarily eased.

What's still uncertain

Despite the market's enthusiastic response, analysts are cautious about reading too much into the move.

The ceasefire is temporary. It covers two weeks only, and the underlying conflict is unresolved. Iran emphasised that "this is not the end of the war" and that the ceasefire is conditional. Trump framed it as a step toward a long-term peace agreement, but significant gaps remain between the two sides.

The Strait of Hormuz question is unresolved. Iran has indicated it intends to 'regulate' passage through the Strait and may charge ships transit fees, a position the US and its allies have described as unacceptable. Whether large-scale oil shipments actually resume quickly is far from certain. Tanker owners need confidence, and that requires clarity on insurance, security conditions, and the specific terms Iran will impose.

'TACO' has entered the market lexicon. Analysts have noted that investors have seen enough last-minute pivots from the Trump administration that a two-week deadline isn't necessarily taken at face value. "TACO is becoming less of a joke and more of a trading strategy," one analyst noted - a reference to 'Trump Always Chickens Out', reflecting scepticism about whether escalation threats are followed through.

In short: markets have priced in relief. They have not priced in resolution.

What this means for traders

Events like this illustrate why geopolitical risk is central to trading financial markets. A single announcement moved oil prices by over 15%, sent equity indices surging across three continents, and shifted gold, bonds and currencies simultaneously, all within hours.

For traders, periods of elevated volatility across multiple asset classes create both opportunity and risk. Instruments that allow exposure to price movements in multiple directions including oil, global indices, gold and currencies become particularly relevant when macro events are driving markets at this scale.

Instruments such as CFDs are commonly used by traders to gain exposure to price movements across assets including oil, global indices, commodities and currencies.

These instruments allow traders to take positions on both rising and falling markets, which can be particularly relevant during periods of heightened volatility driven by geopolitical events.

You can learn more about how to trade oil and index price movements with CFDs.

It's worth noting that while volatility creates opportunity, it also increases risk. Fast-moving markets can move against positions quickly, and leverage amplifies both gains and losses. Understanding the instrument you're using and the macro context driving it is essential.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with XTB. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What traders are watching next

The next two weeks will be critical. The key questions driving markets:

Does the Strait of Hormuz actually reopen? Large-scale shipping resumption requires more than a ceasefire announcement,  tanker insurance, Iranian conditions and physical logistics all need to fall into place.

How does OPEC respond? Oil prices have now fallen below fiscal breakeven levels for some OPEC members. Whether the cartel defends prices through output cuts or moves to reclaim market share - will shape the medium-term oil price outlook.

Do US-Iran negotiations progress? Trump referenced a 10-point proposal from Iran and described the parties as 'very far along'. Whether the two-week window produces meaningful progress toward a permanent deal is the defining question.

Energy sector equities. Airlines are breathing easier as jet fuel costs fall. Energy majors face headwinds as oil retreats from its highs. Both sectors are worth watching as the situation develops.

Markets have been here before, a headline-driven relief rally followed by a return to underlying uncertainty. Whether this ceasefire holds, and whether the Strait fully reopens, will determine whether 7 April 2026 marks a genuine turning point or just a pause.

This article was published on 8 April 2026. The situation is developing, check back for updates as the two-week ceasefire window progresses.