Oil prices tumbled on Wednesday while global stock markets surged after the United States and Iran agreed to a two-week conditional ceasefire. Investors welcomed news that Donald Trump had postponed his threat to attack Iran, while Iran said passage through the Strait of Hormuz would be allowed under military management for the next two weeks. Wall Street recorded its biggest single-day rally in a year. Brent crude fell 16%, and US crude futures dropped 17.6%, slipping below the $100-a-barrel mark. Prices later recovered slightly following Israeli attacks on Lebanon and reports that Iran temporarily halted tanker passage due to an alleged Israeli ceasefire breach. An attack on Saudi Arabia’s east-west pipeline, which bypasses the strait, also added upward pressure. Kathleen Brooks, research director at XTB, said markets would closely watch the fragile truce. She noted that oil could surge back above $110 per barrel if the ceasefire collapsed and military actions resumed, potentially causing stocks and bonds to decline. By Wednesday afternoon London time, Brent crude was down 13.5% at $94.36 a barrel, while US crude fell 15.5% to $95.36, marking its largest single-day drop since the Covid-19 lockdowns six years ago. Despite the decline, prices remain well above pre-war levels when Brent traded below $73 a barrel. Reuters reported that investors had wagered a combined $950 million on falling oil prices just hours before the ceasefire was announced. With his deadline approaching on Tuesday, Trump confirmed he would hold off on attacks if Iran agreed to the temporary truce and reopened the strait. Iran’s national security council accepted the two-week ceasefire, provided attacks against the country ceased. Peace talks with the US are scheduled to begin in Islamabad on Friday. European stock markets reacted strongly, with the Stoxx 600 index gaining 3.7%, its largest one-day rise in a year. Travel and leisure stocks surged, with Air France up 13%, Lufthansa rising 8%, British Airways owner IAG up 8%, and Tui nearly 10%. London’s FTSE 100 rose 2.5% to 10,608.9 points, its highest closing since the early days of the Iran war. Shares of oil companies fell, with BP down 6% and Shell losing 4.7%. US markets also jumped as Wall Street welcomed the ceasefire. The S&P 500 gained 2.5% to 6,782.81, while the Dow Jones industrial average climbed 2.9% to 47,909.92, its best day since April 2025. The Nasdaq Composite advanced 2.8% to 22,634.99. Asian markets followed suit, with Japan’s Nikkei 225 rising more than 5%, Australia’s S&P/ASX 200 up 2.55%, South Korea’s Kospi jumping 7.5%, Hong Kong’s Hang Seng increasing 3.1%, and China’s CSI 300 up 3.2%. European gas prices fell sharply, with the UK gas contract down 17% at 111.1p a therm. Treasury yields dropped as well, with the US 10-year yield declining to 4.24% from 4.30%, and the UK 10-year yield falling to 4.7% from 4.9%. Gold prices rose over 2% to $4,812 an ounce, while cryptocurrencies rallied, with bitcoin up 2.9% at $71,327 and ether climbing 5.6% to $2,234. Saul Kavonic, head of energy research at MST Financial, said the two-week pause offered an “off-ramp” from Trump’s aggressive ultimatum but did not fully ease oil market concerns. He explained that tanker releases from the Strait of Hormuz would relieve market pressure but would not increase production. Neil Shearing, chief economist at Capital Economics, said the agreement allows tanker passage, but terms such as potential transit fees remain unclear. He noted that fees could add roughly $1 per barrel to oil transport costs, having only a modest impact on global prices. Prashant Newnaha, senior strategist at TD Securities, said markets are treating the ceasefire as genuine and are reacting positively. He warned that oil prices are unlikely to return to pre-war levels, leaving inflation a key issue for investors to monitor in the coming months.