Oil Drops, US Futures Rise on Iran Ceasefire Deal

Japan’s benchmark index Nikkei 225 rose 4.8%, and South Korea’s Kospi index rose 5.6%. S&P 500 futures rose 2.3% as of 21:30, while Dow futures rose 2%.

U.S. crude oil futures fell 14.3 percent to $96.83 per barrel, and Brent crude, the international standard, fell 13.3 percent to $94.74. Oil prices had risen rapidly as the war disrupted crude oil production and transportation in the Persian Gulf. Much of this oil leaves the Gulf through the Strait of Hormuz to reach customers around the world, but Iran has closed it off to enemies.

Late Tuesday, Trump said he was postponing threats to attack Iranian bridges, power plants and other civilian targets. Iran’s foreign minister said passage through the strait will be allowed under Iranian military rule for the next two weeks.

The dramatic moves in prices are the latest fluctuations that have affected financial markets since late February due to ever-changing signals about when the conflict might end. Despite news of the ceasefire, neither Iran nor the US said when the ceasefire would begin, and attacks took place in Israel, Iran and the Gulf region early on Wednesday.

Earlier, US stocks fluctuated sharply during normal trading as uncertainty about war with Iran grew after Trump threatened that “an entire civilization will die tonight and never be brought back” if Iran fails to give Iran until 8pm Eastern time to open the Strait of Hormuz.

The S&P 500 index fell as much as 1.2 percent, but stocks recovered at the end of trading after Pakistan’s prime minister called on Trump to extend the deadline for another two weeks and asked Iran to open the strait for the same period.

The S&P 500 erased all its losses and closed with a modest gain of 0.1%. The Dow Jones Industrial Average fell 85 points, or 0.2%, and the Nasdaq composite rose 0.1%.

These are the latest fluctuations that have affected financial markets since the end of February due to deep uncertainty about when the war will end.

Oil prices were equally unstable. The price of a barrel of US crude oil for delivery in May settled at $112.95 after briefly rising above $117.

Oil prices rose as the war disrupted crude oil production and transportation in the Persian Gulf. Much of this oil leaves the Gulf through the Strait of Hormuz to reach customers around the world, but Iran has closed it off to enemies.

The concern in markets is that a long-term disruption would keep oil prices high for a long time and lead to a painful wave of inflation that would hit the global economy. Trump kept traders on edge by making a series of threats to blow up Iranian power plants, only to delay several times.

The average price of a gallon of regular gasoline across the U.S. jumped to $4.14, according to AAA. The figure was below $3 a few days before the United States and Israel launched an offensive to start the war in late February.

In the bond market, Treasury yields fell on news of a possible ceasefire. The yield on the 10-year Treasury note fell to 4.24% from 4.30% earlier Tuesday.

That’s still well above the prewar level of 3.97%, and the increase slowed the economy by raising mortgage and other loan rates to U.S. households and businesses.