Oil prices to stay high, relief rally follows US-Iran ceasefire

A significant relief rally is now underway, but oil prices are set to remain structurally higher, the CEO of a leading independent financial advisory has warned, following President Donald Trump’s decision to suspend military action against Iran for two weeks. Markets responded instantly, easing immediate fears around a prolonged disruption to world energy flows through the Strait of Hormuz. Futures linked to the Dow Jones Industrial Average surged, while the S&P 500 and Nasdaq 100 posted gains above 2%, signalling a powerful rebound in risk appetite. Oil prices, which had surged amid supply fears, pulled back aggressively as traders priced in a temporary easing of geopolitical risk. West Texas Intermediate – the benchmark US crude oil price – plummeted to a nearly two-week trough during the Asian session on Wednesday in reaction to news that the US and Iran have agreed to a two-week ceasefire. The commodity, however, trimmed a part of heavy intraday losses and currently trades around mid-$90.00s, still down over 10% for the day. “Markets have been primed for this moment. Positioning had become defensive, volatility was elevated, and energy prices were reflecting worst-case assumptions,” deVere Group’s Nigel Green said. “A pause, even a temporary one, releases that pressure very quickly.” However, the deVere Chief executive warned a relief rally of this magnitude reflects how stretched sentiment had become. “Investors were bracing for escalation that could have choked off a fifth of world oil supply. Remove even part of that threat and capital flows back into equities at speed.” Equity markets had already shown signs of anticipating an off-ramp, with major indices stabilising despite ongoing tensions. The latest move confirms that investors are highly sensitive to geopolitical signals and willing to rotate rapidly as narratives shift. Nigel Green explained that tech could lead the rebound because it was hit hardest by rising yields and risk aversion. “Lower energy prices reduce inflation expectations at the margin, which supports valuations. “We expect strong moves in megacap tech and AI-driven names.” He added that consumer discretionary will also benefit. “Lower oil feeds through to gasoline prices, which supports spending. “Airlines, travel, and retail are also going to be immediate winners from cheaper fuel and improved sentiment.” Market stability Financials are also likely to participate in the upswing. Improved market stability tends to support deal activity and risk-taking, both critical for bank earnings. The deVere CEO noted that, “banks perform better in environments where uncertainty declines. A pause in conflict reduces tail risks, which is constructive for credit markets and capital markets activity.” Energy stocks, however, face a more nuanced outlook. “Energy equities may see short-term pressure as crude pulls back, but the structural backdrop remains tight. Supply constraints have not disappeared. “A two-week pause does not rebuild inventories or solve geopolitical fragmentation.” Crude oil remains significantly higher on the year, reflecting underlying supply risks that extend beyond the current conflict. Any reopening of the Strait of Hormuz, even temporarily, provides breathing space but does not eliminate vulnerability in energy logistics. “Oil is unlikely to return to previous lows quickly. The geopolitical premium is now embedded. Even with de-escalation, traders will price in the risk of renewed disruption,” Green cautioned. Central to the market’s next move is the credibility of the two-week window. “Investors have seen this timeline before. A short-term pause creates relief, but it also introduces a countdown. Markets will quickly shift focus from celebration to scrutiny.” Diplomatic signals, compliance with ceasefire terms, and coordination over shipping routes through Hormuz will all be closely monitored, Green said. “If progress towards a durable agreement emerges, the rally can extend and broaden. Industrial stocks, emerging markets, and cyclicals would then have room to catch up.” Failure to convert this pause into a longer-term framework would reverse sentiment just as quickly. “Volatility would return, oil would spike again, and equities would give back gains.” The post Oil prices to stay high, relief rally follows US-Iran ceasefire appeared first on Financial Mirror.