A temporary truce between the United States and Iran has sent oil prices tumbling and global stock markets surging, yet the critical waterway at the heart of the energy crisis remains largely closed. The ceasefire, brokered by Pakistan and announced on 8 April, marks a significant moment in a six-week conflict that has caused the largest disruption to global oil supply on record.
A Deal Struck at the Eleventh Hour
The agreement came less than two hours before a deadline set by President Donald Trump, who had threatened to destroy Iranian infrastructure if the Strait of Hormuz was not reopened. Pakistan's Prime Minister Shehbaz Sharif played a key role in pulling both sides back from the brink, asking Washington to extend its deadline and calling on Tehran to allow ships to pass through the strait as a goodwill gesture. Trump confirmed the US had received a ten-point proposal from Iran, which he described as a workable basis for further talks. Under the terms of the ceasefire, both countries agree to halt military operations for two weeks, with the US stating that Iran had committed to a complete and immediate reopening of the strait.
Markets Move Fast, Reality Moves Slower
The market reaction was swift. West Texas Intermediate crude fell more than 16% to settle at $94.41 per barrel on 8 April, its biggest single-day decline since April 2020. Brent crude dropped 13% to $94.75. The Dow Jones Industrial Average posted its best daily gain in a year, rising more than 1,300 points. The S&P 500 closed up 2.5%, and stock markets in Europe and Asia also surged. Rate cut odds at the US Federal Reserve jumped to 45% by year-end, as energy-driven inflation fears eased temporarily.
However, the relief was short-lived. By 9 April, oil prices had climbed back above $97 per barrel. The Strait of Hormuz, through which roughly 20% of the world's oil and gas normally passes, remained effectively closed. Data from shipping analytics firm Kpler showed vessel numbers through the waterway were still at a fraction of the usual daily figure of around 135 ships. The Abu Dhabi National Oil Company's chief executive confirmed that Iran was restricting and conditioning traffic, with around 230 loaded tankers waiting inside the Gulf.
A Supply Shock That Will Not Clear Overnight
The conflict, which began on 28 February when the US and Israel launched strikes on Iran, triggered the largest disruption of crude supplies in history, cutting an estimated 12 to 15 million barrels per day from world markets. Even with a ceasefire in place, analysts warn that the physical damage to energy infrastructure in the region and the backlog of stranded vessels means a full recovery will take months. The spot price of physical Brent crude, which reflects real-world supply conditions, stood at over $130 per barrel on 9 April despite the drop in futures prices. Energy Aspects founder Amrita Sen noted that most tankers had already redirected towards the US to collect oil there, and that returning them to the Middle East could take until June.
What Comes Next
Delegations from both sides were expected to meet in Islamabad in the days following the ceasefire to work towards a longer-term agreement. Analysts at Aberdeen Investments and Georgetown University have both highlighted the deep trust deficit between Washington and Tehran, pointing to Iran's nuclear programme and the history of US withdrawal from prior agreements as major obstacles. Energy markets are likely to remain elevated well above pre-war levels even if shipping resumes, as governments restock reserves and infrastructure is rebuilt. For investors, the ceasefire is a reason for cautious optimism, not a signal that the crisis is over.
