On Tuesday, the United States and Iran agreed to a two-week ceasefire, which was announced by US President Donald Trump. The truce is contingent on Iran reopening the Strait of Hormuz, and both countries are scheduled to meet in Pakistan on Friday to discuss the 10-point proposal submitted by Iran, which Trump described as a workable basis for negotiation [2]. The Iranian President Masoud Pezeshkian emphasized to Pakistan's Prime Minister that a ceasefire in Lebanon is an essential condition within the agreement framework, and as of the latest reports, the Strait of Hormuz remains closed, with Iranian officials suggesting it could reopen on Thursday or Friday if a ceasefire framework is reached [2].
The ceasefire news had an immediate and significant impact on financial markets. Wall Street's main stock indexes opened strong on Wednesday, with the Dow Jones Industrial Average (DJIA) rising more than 3% [1]. Traders at the New York Stock Exchange responded positively, buoyed by hopes that the ceasefire would reduce geopolitical risks and stabilize global markets [1]. Technical analysts noted that the DJIA broke through key resistance levels, indicating potential for further upside if the ceasefire holds, though they cautioned that volatility could return if tensions escalate or the agreement is not extended [1].
Crude oil futures experienced a sharp decline, dropping 19% according to Nikkei Asia [1], while FXStreet reported West Texas Intermediate (WTI) oil falling nearly 14% to below $95.00 per barrel [2]. This drop in oil prices was attributed to expectations of energy supply normalization following the ceasefire announcement [1][2]. The fall in oil prices also weighed on the US Dollar, with the US Dollar Index (DXY) declining 0.60% to 98.91, a four-week low [2]. Energy stocks saw mixed performance, with some companies facing downward pressure due to the falling price of crude [1].
Gold (XAU/USD) advanced on Wednesday, trading at $4,735, up more than 0.70%, though off its earlier three-week high of $4,857 [2]. The rise in gold was supported by the softer dollar and lower oil prices, which eased inflation fears and dented demand for the greenback [2]. Global central banks saw reduced fears of a second wave of inflation from the energy shock, and money markets shifted expectations for the Federal Reserve, now pricing in nearly 10 basis points of easing by year-end [2].
Looking ahead, market participants are closely monitoring developments in the Middle East, especially the status of the Strait of Hormuz and the outcome of US-Iran talks in Pakistan [1][2]. Upcoming US economic data, including jobless claims, Q4 2025 GDP, and the Core PCE Price Index, are also in focus for further market direction [2].
CONCLUSION
The US-Iran ceasefire has triggered a strong rally in US equities, a sharp drop in oil prices, and a rise in gold, reflecting improved investor sentiment and reduced geopolitical risk. However, markets remain sensitive to developments in the Middle East, particularly regarding the reopening of the Strait of Hormuz and the durability of the ceasefire. Forward-looking expectations for Federal Reserve policy have shifted toward potential easing, as inflation fears subside.