Oil prices have dropped sharply following news of a cease-fire agreement between Israel and Iran. This development eased investor fears about escalating conflict in the Middle East, which had been driving up oil prices.
Before the cease-fire, oil prices were already falling after Iran launched missile strikes at a U.S. airbase in Qatar. However, these strikes were seen as a sign that Iran wanted to avoid further conflict, especially since it did not target the Strait of Hormuz—a critical route for global oil and gas shipping.
President Donald Trump announced early Tuesday that both Israel and Iran had agreed to a “complete and total” cease-fire. Israel confirmed the agreement, saying it had met its military objectives. Although Iran’s foreign minister initially denied that a formal cease-fire had been reached, he stated that Iran would not escalate the situation further if Israel stopped its attacks.
Following this news, oil prices fell significantly:
U.S. West Texas Intermediate (WTI) crude dropped 3.2% to $66.30 per barrel.
International Brent crude fell 3.4% to $69.08 per barrel.
These declines erased the gains oil had made since June 12, just before Israel launched strikes on Iran.
At the same time, U.S. stock futures rose:
S&P 500 futures were up 0.87%.
Dow futures climbed 0.76%.
Nasdaq futures jumped 1.1%.
Monday’s Iranian missile strikes came in response to U.S. attacks on three Iranian nuclear facilities the previous day. Despite targeting a U.S. airbase, Iran's actions were interpreted by analysts as a controlled response meant to avoid major escalation. Iran reportedly gave the U.S. early warning, and no casualties were reported. Qatar confirmed that the missiles were intercepted.
Now, energy markets are focusing on the Strait of Hormuz, which is a crucial passage for about 25% of the world’s oil transported by sea and 20% of liquefied natural gas. Any disruption there could cause new price spikes. Experts emphasized the importance of this waterway and warned that its closure would have serious consequences for global markets.
President Trump downplayed Iran’s retaliation as “very weak” in a Truth Social post and thanked Tehran for the advance notice.
Despite the current calm, experts remain cautious. Russ Mould from AJ Bell noted that investors will be closely watching whether the cease-fire holds and how Iran responds next. Deutsche Bank analysts added that although the past two weeks have been tense, this conflict may end up having only a short-term impact on global markets, like many past geopolitical events.