Markets Rally as U.S.-Iran Ceasefire Eases Hormuz Stranglehold

European stocks surged Wednesday, mirroring gains across Asian equities and U.S. futures, as investors welcomed news that Washington and Tehran had agreed to a temporary ceasefire in their more than month-long war — a conflict that had rattled global energy markets and stoked fears of a prolonged inflationary shock.

The pan-European Stoxx 600 spiked 3.7%, Germany’s Dax climbed 4.9%, France’s CAC 40 rose 3.6%, and the UK’s FTSE 100 gained 2.5% in early trading. The broad-based rally reflected the scale of relief felt across financial markets after weeks of mounting anxiety over energy supply disruptions.

The deal was reached Tuesday evening following an ultimatum from U.S. President Donald Trump, who had threatened to eradicate Iran’s entire civilization if Tehran refused to reopen the Strait of Hormuz. Pakistan, which has recently served as a mediator between the two sides, played a pivotal role in brokering the agreement. Trump announced the ceasefire on social media, confirming he had agreed to suspend military action against Iran for two weeks after Pakistani Prime Minister Shehbaz Sharif urged him to step back from his Tuesday evening deadline. Sharif subsequently invited U.S. and Iranian officials to Islamabad for talks on Friday.

Iran’s Foreign Minister Abbas Araghchi confirmed Tehran would halt its defensive operations and allow safe passage through the Strait of Hormuz, provided shipping is coordinated with the Iranian military. Israel, which launched a joint assault on Iran alongside the U.S. in late February, backed Trump’s decision, though its statement made no reference to Lebanon, where Iran-aligned Hezbollah continues to face Israeli military pressure.

The ceasefire’s most immediate market impact was felt in oil. Brent crude futures fell sharply, dropping below the $100-per-barrel threshold after weeks of steep gains driven by the effective closure of the strait — the narrow waterway off Iran’s southern coast through which roughly a fifth of the world’s oil supply passes. Despite the pullback, prices remain well above pre-war levels, reflecting lingering uncertainty over whether the truce will hold and translate into a lasting resolution.

Asian equity markets, many belonging to economies that are heavy importers of Middle Eastern oil and gas, also rallied sharply. European energy exposure extends beyond crude oil — the continent relies on natural gas from the Persian Gulf, particularly Qatar, whose energy infrastructure had been targeted by Iranian strikes, adding another layer of supply risk that markets are now cautiously unwinding.

While analysts caution that the agreement is temporary and a durable peace deal remains far from certain, the ceasefire has for now interrupted a conflict that many feared was on course to entrench inflationary pressures and drag on global economic growth at an already fragile moment.