Oil plunges, stock futures rally on Trump floating Iran ceasefire

Oil prices plunged and U.S. stock futures soared Tuesday evening after President Donald Trump announced “a double sided ceasefire” in the war with Iran at the request of Pakistan, who has been serving as an intermediary in recent talks.

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In his social media post, Trump said the ceasefire was subject to “to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.”

Nonetheless, the price of U.S. crude oil slid more than 12% to $98 per barrel, a stunning drop after it traded as high as $117 earlier in the day.

S&P 500 futures also soared, rising more than 1.8%, while Dow futures spiked by 800 points and Nasdaq 100 futures jumped 2%.

Futures that track the Russell 2000 index rose 2.5%.

The price of natural gas, wholesale RBOB gasoline, and heating oil, which is a proxy for jet fuel, also traded sharply lower on the news of a potential ceasefire.

U.S. crude oil is still up more than 70% since the year began, even after Tuesday night’s sharp drop.

Since the beginning of March, marine traffic through the Strait of Hormuz has been effectively halted as tankers hesitated to wade into a narrow waterway so close to the Iranian coast. Ships have also been threatened and struck with drones and projectiles.

Normally, the Strait of Hormuz carries more than 20% of the world’s oil supply to the global market.

As a result, markets had been on edge all day, watching and parsing headlines to determine if a pause would be announced or if the war would escalate.

U.S. Treasury yields also declined on the announcement, another sign that traders are likely breathing at least a temporary sigh of relief.

Markets in Asia and Europe were also set to open sharply higher in the hours ahead. Futures contracts for Japan’s Nikkei benchmark stock index pointed to a jump of nearly 3% when it opens.