Global markets reversed course on Wednesday (April 8), with oil suffering its steepest daily plunge since the pandemic following a breakthrough two-week ceasefire agreement between the US and Iran.
Brent crude, the international benchmark, tumbled 15.5 percent to US$92.28 a barrel, shedding nearly $17 in a single session. The slide marks its sharpest one-day drop since April 2020.
US crude futures followed suit, diving 16.5 percent to approximately US$94 a barrel. Natural gas markets mirrored the collapse, with UK gas prices sinking 18 percent.
Despite the dramatic sell-off, energy prices remain elevated compared to the US$70 baseline recorded before hostilities erupted on February 28.
The market whiplash stems from a late Tuesday (April 7) announcement by US President Donald Trump, who walked back earlier threats of catastrophic escalation.
Having warned earlier in the day that “a whole civilisation will die tonight” if his demands were ignored, Trump pivoted sharply on social media.
“I agree to suspend the bombing and attack of Iran for a period of two weeks… subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz,” the president stated in a recent post, adding that the US had received a 10-point proposal from Tehran that served as a workable basis for long-term peace negotiations.
Tehran confirmed the de-escalation parameters. Iranian Foreign Minister Abbas Araghchi stated on X that the government would agree to the halt “if attacks against Iran are halted,” confirming that safe passage through the critical waterway “will be possible.”
A senior Iranian official told Reuters the strait could reopen as early as Thursday or Friday, ahead of planned peace talks in Islamabad.
The prospect of unimpeded energy ignited a relief rally across global equities.
In Asia, Japan’s Nikkei 225 leapt 5.4 percent, while South Korea’s Kospi surged 6.8 percent. The bullish sentiment carried into European hours, pushing Germany’s Dax up more than 5 percent and London’s FTSE 100 up 3 percent in mid-afternoon trading.
On Wall Street, all major indices gapped up, with the Dow Jones Industrial Average (INDEXDJX:.DJI) gaining 2.5 percent, the S&P 500 (INDEXSP:.INX) rising 2.2 percent, and the Nasdaq Composite (INDEXNASDAQ:.IXIC) climbing up to 3.3 percent.
While the ceasefire offers immediate financial relief, the physical energy market faces a prolonged hangover. Roughly 1,000 ships remain trapped near the Strait of Hormuz, a conduit that historically handles a fifth of the world’s oil and gas.
Furthermore, output capacity is severely impaired. Retaliatory Iranian strikes have devastated regional infrastructure, with repairs estimated to cost more than US$25 billion.
Mid-March strikes on Qatar’s Ras Laffan industrial hub slashed the nation’s liquefied natural gas export capacity by 17 percent, damage the hub’s owners say will take up to five years to fix.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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