Stocks Jump With Bonds as Oil’s Plunge Lifts Mood: Markets Wrap
(Bloomberg) — A relief rally swept through global markets, lifting stocks and sparking the biggest drop in oil prices in almost six years after a two-week ceasefire deal between the US and Iran.
West Texas Intermediate tumbled as much as 19% after President Donald Trump agreed to suspend bombing of Iran in a move aimed at restoring oil flows through the Strait of Hormuz. Iran said safe passage through the waterway will be possible during that period. Global benchmark Brent crude slid 14% to around $94 per barrel.
Stock futures for Wall Street gauges rose at least 2.5% and Europe’s Stoxx 600 index surged 3.8%, the most since April last year, as traders bet lower oil prices will help contain inflation and support economic growth. MSCI’s Asia Pacific equity index jumped 5.1% to the highest in five weeks. European government bonds rallied with Treasuries as reduced energy-price pressures encouraged traders to revive wagers on central bank interest-rate cuts. A gauge of the dollar, which emerged as the haven of choice during the conflict, fell 0.8%, while gold rose.
The ceasefire proposal — announced just hours before a Trump deadline to escalate bombing of Iran — has rekindled risk sentiment after the Middle East war that began six weeks ago drove up bond yields and pushed several stock gauges into correction territory. Still, for the rally to hold, traders will need confirmation that the ceasefire will last and energy flows through the Strait of Hormuz normalize.
“We now have two weeks of respite,” said Vincent Juvyns, chief investment strategist at ING in Brussels. “It remains to be seen whether the crisis is really over, but its impact on oil prices will remain. Whatever happens we’re heading towards slower global growth and higher inflation this year.”
Trump announced the agreement hours after Pakistan, a mediator in talks, implored the US leader to back off his deadline to unleash massive devastation on Iran. The deal buys time for the two sides to reach a longer agreement to end the war, which has killed thousands of people and sparked a global energy crisis.
Trump’s decision represents a dramatic climb-down from a bellicose social media post earlier Tuesday, in which he warned “a whole civilization will die tonight, never to be brought back again” if Iran didn’t give in.
“It’s a good result considering the alternatives, as it shows a willingness to get something done,” said Matthew Haupt, a fund manager at Wilson Asset Management in Sydney. “This is also showing promising signs that we’ve dodged the worst-case scenario.”
Yields on 10-year government debt in Germany and the US tumbled around 20 basis points at the open. European gas prices sank 20% on the news of the ceasefire, prompting traders to dial back bets on possible interest-rate hikes.
Some investors remained skeptical.
“The outlook depends on whether the ceasefire holds, and at the moment I have little confidence that it will,” said Neil Newman, head of strategy at Astris Advisory Japan. “So I view this as very fragile relief. I would recommend using the volatility to exit underperforming stocks and strategically build positions.”
Christopher Dembik, a senior investment adviser at Pictet Asset Management, predicted traders would sell oil and defense stocks on the news and buy shares of companies that suffered the most during the crisis.
“The inflation shock is just beginning, notably for food and materials,” he said. “Overall I’m rather cautious because we’ve got used to Trump not necessarily sticking to ceasefires and diplomatic deals.”
A key test for investors will be whether oil and gas can now flow through the Strait of Hormuz uninterrupted. Safe passage will be possible via coordination with Iran’s armed forces and with “due consideration of technical limitations,” Iranian Foreign Minister Abbas Araghchi said in a post on X.
Shipowners are scrambling to understand the fine print in the ceasefire, hoping to take advantage of a potential window to extract more than 800 vessels trapped in the Persian Gulf.
What Bloomberg Strategists Say…
“The capacity for these initial knee-jerk gains to extend is going to depend on whether the attacks will indeed fade away and on the course of the talks assuming they go ahead from Friday in Islamabad.”
— Garfield Reynolds, Markets Live team leader. For more on the analysis, click, here.
Elsewhere, gold jumped 2.7% to about $4,835 an ounce as bullion — a non-yielding asset — typically benefits in a lower interest-rate scenario. Silver surged 5.9% to over $77 an ounce.
The Treasury yield curve bull-steepened as a slump in oil prices fueled bets that slower inflation will pave the way for the Federal Reserve to cut rates. Policy sensitive two-year yields dropped six basis points to 3.72%, while their 10-year counterparts fell five basis points to 4.24%.
Overnight-indexed swaps signaled a 60% likelihood of a Fed rate cut by the year-end, compared with almost no chance seen at the start of this week. They had priced in more than two rate reductions before the US and Israel attacked Iran in late February.
“There’s room for more bull steepening” in the near term, said Ken Crompton, head of rates strategy at National Australia Bank Ltd. “The market could readjust toward a slightly greater chance of FOMC cuts than currently priced.”
Stock markets likely have found a floor as the latest US-Iran ceasefire suggests uncertainties over the war have peaked, according to JPMorgan Chase & Co.’s equity sales desk.
Wall Street traders have been on edge, hanging on every development in the Middle East and the often unpredictable missives of Trump.
One technical metric, the daily turnover in the State Street SPDR S&P 500 ETF Trust, has breached $60 billion — a reading seen as a “freak out” indicator by Bloomberg Intelligence strategists — 29 times this year. That new record compares to 28 times in all of 2025, according to BI’s Athanasios Psarofagis.
“Be aware that we can still see more volatility on any fresh headline,” said Nick Twidale, chief market analyst at AT Global Markets. “These are big moves in markets which should promote further volatility today.”
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 rose 3.8% as of 8:21 a.m. London time S&P 500 futures rose 2.5% Nasdaq 100 futures rose 3.2% Futures on the Dow Jones Industrial Average rose 2.3% The MSCI Asia Pacific Index rose 4.9% The MSCI Emerging Markets Index rose 5% Currencies
The Bloomberg Dollar Spot Index fell 0.8% The euro rose 0.8% to $1.1690 The Japanese yen rose 0.9% to 158.24 per dollar The offshore yuan rose 0.4% to 6.8249 per dollar The British pound rose 1% to $1.3423 Cryptocurrencies
Bitcoin rose 3.6% to $71,784.74 Ether rose 6.5% to $2,251.62 Bonds
The yield on 10-year Treasuries declined five basis points to 4.24% Germany’s 10-year yield declined 16 basis points to 2.93% Britain’s 10-year yield declined 20 basis points to 4.71% Commodities
Brent crude fell 13% to $94.52 a barrel Spot gold rose 2.2% to $4,810.04 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Alice French, Mark Cranfield, Momoka Yokoyama, Masaki Kondo, Winnie Hsu and Matthew Burgess.
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