US-Israel-Iran conflict ceasefire: Crude oil prices drop by 15%; what is the impact on global markets and Dollar?
Following the announcement of a two-week ceasefire in the US-Iran conflict, crude oil prices have dropped by 15%. On Wednesday, prices fell by approximately $15, settling at $94.27 per barrel.
According to reports, this marks the largest single-day decline in nearly six years. Just a day earlier, the price of crude oil stood at $109.27 per barrel. Prior to the outbreak of hostilities on February 28, crude oil was trading at $73 per barrel.
During the conflict, prices had surged to a peak of $120 per barrel. Consequently, there had been widespread apprehension regarding a potential hike in petrol and diesel prices. According to experts, however, the recent decline in oil prices has now dispelled these fears.
Strait of Hormuz Expected to Reopen Following Ceasefire
The 40-day conflict between the US and Iran has come to a temporary halt with the implementation of a two-week ceasefire. Both nations agreed to the ceasefire following mediation efforts led by Pakistan and China.
Under the terms of the agreement, the US, Israel, and Iran have pledged to cease all offensive operations. Furthermore, with the assistance of the Iranian military, the safe passage of vessels through the Strait of Hormuz is to be ensured.
The US President had previously issued a stern warning to Iran, threatening to devastate the nation. He had stated that if unimpeded access through the Strait of Hormuz was not granted, he would obliterate the entirety of Iranian civilization.
Whenever cargo vessels traverse the Strait of Hormuz, they are subject to surveillance by the Iranian military.
Global Markets Rally, Dollar Weakens Amid Ceasefire
News of the cessation of hostilities has triggered a rally across global stock markets. US S&P 500 futures climbed by 2%, while European markets surged by up to 5%. India's benchmark indices—the Sensex and Nifty—also rose by approximately 4%. Bolstered by renewed investor confidence, the Indian Rupee has strengthened against the US Dollar.
According to the Reserve Bank of India (RBI), during early trading on Wednesday, the Rupee appreciated by 41 paise against the US Dollar, reaching a level of 92.55. It closed at 92.96 on Tuesday.
Analysts suggest that the relief currently being witnessed may not last for long. While this certainly marks a positive start, several uncertainties remain.
Experts believe that if a comprehensive agreement is not reached within two weeks, prices could once again surge above the $100 mark.