Global markets surged and crude oil prices plunged after US and Iran agreed to a two-week ceasefire, halting a potential war at the last minute, with Indian equities leading gains as benchmark indices jumped over 3% and oil prices tumbled sharply on easing supply concerns.
The breakthrough, announced by US president Donald Trump just 90 minutes before his military deadline, marked a dramatic de-escalation in West Asia tensions, triggering a broad-based rally across Dalal Street and global markets while significantly cooling crude prices that had spiked, amid fears of disruption in the Strait of Hormuz.
The announcement came barely 90 minutes before president Trump’s self-imposed deadline for a potential large-scale military strike on Iran, marking a sudden de-escalation after weeks of heightened tensions that had raised fears of a broader regional conflict.
Diplomatic Breakthrough at the Brink
The ceasefire proposal, brokered through backchannel diplomacy led by Pakistan, is confirmed by president Trump in a post on Truth Social on Tuesday evening (US time). The US president says he had agreed to suspend planned attacks on Iran for two weeks, subject to key conditions.
“Based on conversations with prime minister Shehbaz Sharif and field marshal Asim Munir, I have agreed to hold off the destructive force being sent tonight to Iran,” Mr Trump says, adding that the pause depends on Iran agreeing to the “complete, immediate, and safe opening” of the strategically vital Strait of Hormuz.
Pakistan subsequently invited the US and Iran for talks in Islamabad, signalling an effort to convert the temporary pause into a more durable diplomatic resolution.
Conditional Ceasefire and Fragile Calm
The ceasefire remains contingent on Iran reopening the Strait of Hormuz, a critical global energy transit route that handles about a fifth of the world’s oil shipments. The Strait had been partially restricted in recent weeks, contributing to volatility in energy markets.
Iran signalled tentative acceptance of the arrangement. Foreign minister Seyed Abbas Araghchi says Tehran would halt its operations if attacks against the country ceased.
“If attacks against Iran are halted, our powerful armed forces will cease their defensive operations,” he said, adding that safe passage through the strait could be ensured for two weeks under coordinated arrangements.
A senior White House official indicated that Israel has also agreed to the pause, though with caveats. The office of prime minister Benjamin Netanyahu clarified that while Israel supports the US decision, the ceasefire does not extend to Lebanon and remains limited to Iran-related operations.
Global Relief, but Uncertainty Lingers
The announcement brought immediate relief to global markets which had been bracing for a major escalation. President Trump himself said the US had already 'met and exceeded all military objectives' and is close to a broader agreement with Iran.
However, reports of missile and drone activity in parts of the Gulf even after the announcement underscored the fragile nature of the ceasefire. Key issues, including sanctions, Iran’s nuclear programme and long-term control of the Strait of Hormuz, remain unresolved.
At the UN, a Bahrain-led attempt to pass a resolution to reopen the strait failed after vetoes by Russia and China, reflecting deep geopolitical divisions.
Markets Surge, Volatility Eases
Financial markets reacted sharply to the de-escalation.
In India, benchmark indices on Dalal Street surged over 3%, reflecting investor optimism. The Sensex jumped about 2,775 points to touch 77,392 in early trade, while the NIFTY rose over 800 points to trade near 23,938.
Broad-based buying was seen across sectors, with real estate, banking, auto and pharma stocks gaining up to 6%. Mid-cap and small-cap indices outperformed, while the India VIX — a measure of market volatility — dropped nearly 19%.
Despite the rally, volatility may persist due to ongoing geopolitical risks and foreign fund outflows. Foreign institutional investors (FIIs) remained net sellers to the tune of around ₹8,692 crore in the previous session, while domestic institutional investors (DIIs) provided support with inflows of about ₹7,980 crore.
Global markets echoed the positive sentiment. Japan’s Nikkei surged over 5%, South Korea’s Kospi gained more than 6%, and Hong Kong’s Hang Seng rose over 3% in early trade. US stock futures also climbed, signalling relief among investors.
Crude Oil Tumbles Sharply
Oil prices corrected sharply as fears of supply disruptions eased.
Brent crude futures plunged about 15.9%, falling by over US$17 to trade near US$91.88/per barrel. US West Texas Intermediate (WTI) crude dropped nearly 20%, slipping below US$100 a barrel.
The decline reversed weeks of gains driven by concerns over restricted shipping through the Strait of Hormuz. According to reports, the easing of tensions significantly reduced the risk premium that had built up in global oil prices.
The sharp fall in crude is particularly significant for major importers like India, where elevated oil prices can directly impact inflation, currency stability, and fiscal dynamics.
Political Backlash in the US
Even as the ceasefire drew global relief, president Trump’s earlier threats sparked strong political reactions at home. Several Democrats criticised his warnings of wiping out Iranian civilisation, calling them 'unhinged' and demanding accountability.
The episode highlighted the high-stakes brinkmanship that defined the crisis, with Trump using a mix of military pressure and last-minute diplomacy to push for concessions.
Narrow Window for Diplomacy
The two-week ceasefire now provides a limited but critical window for negotiations. President Trump indicated that the US had received a 'workable' 10-point proposal from Iran and that most contentious issues had been addressed in principle.
However, the success of the ceasefire hinges on strict compliance by all parties, particularly regarding the reopening of the Strait of Hormuz and cessation of hostilities.
For India and other energy-dependent economies, the outcome of these talks will be closely watched. Any renewed disruption in the Gulf region could have immediate economic consequences.
For now, the pause in hostilities has averted an immediate crisis, stabilised markets and opened a pathway — albeit uncertain — towards a broader peace agreement in one of the world’s most volatile regions.
