Global financial markets have reacted positively to the recent announcement of a ceasefire agreement between Israel and Iran, brokered by U.S. President Donald Trump. This development has significantly eased fears of potential disruptions to global oil supplies, particularly through the vital Strait of Hormuz, a chokepoint for approximately 20% of the world's petroleum consumption.
President Trump took to social media to declare a "Complete and Total CEASEFIRE" aimed at concluding "THE 12 DAY WAR." The proposed agreement outlined a phased implementation: Iran was to cease attacks at midnight Eastern Time, followed by Israel halting strikes 12 hours later, with the conflict officially ending after 24 hours. Trump asserted that both nations "almost simultaneously" approached him seeking peace, with direct communication between Trump and Israeli Prime Minister Netanyahu, while Vice President Vance, Secretary of State Rubio, and Middle East envoy Witkoff engaged with Iranian officials.
However, the ceasefire's early hours were not without challenges. Israel reported intercepting missile barrages from Iran, alleging violations of the agreement. President Trump later expressed his "not happy" sentiment regarding both sides' apparent breaches. The Qatari government played a pivotal role in finalizing the deal, with Trump reportedly enlisting the Qatari Emir's assistance to persuade Iran after an Iranian missile strike on Al Udeid Air Base in Qatar caused minimal damage.
The strategic importance of the Strait of Hormuz cannot be overstated. This narrow waterway, merely 33 kilometers wide at its most constricted point, is the world's most critical maritime chokepoint for energy security. It facilitates the transit of around 20 million barrels of oil daily, representing a substantial portion of global petroleum flow. Moreover, it handles roughly one-fifth of the world's liquefied natural gas trade, predominantly from Qatar. The Strait is the sole viable sea route for oil exports from major producers like Kuwait, Iraq, Saudi Arabia, Qatar, the UAE, and Iran. Approximately 65% of the oil transported through this strait is destined for Asian markets, including China, India, Japan, South Korea, and Singapore. With limited bypass options, mainly pipelines in Saudi Arabia and the UAE, the Strait's geopolitical significance has historically made it a flashpoint, with Iran frequently threatening its closure during periods of heightened tension.
The market's immediate response to the ceasefire announcement was a sharp decline in oil prices. West Texas Intermediate (WTI) crude futures dropped by 3.2% to $66.30 per barrel, while Brent crude, the international benchmark, fell by 3.4% to $69.08 per barrel. This reversed the gains observed since June 12, the day before Israel's initial strike on Iran. Oil prices had previously peaked at over $78 per barrel just a week prior, levels not seen since early 2025.
This price plunge reflects investors' relief that a significant supply disruption was seemingly averted. Analysts at JPMorgan had previously cautioned that an Iranian closure of the Strait of Hormuz could be a "severe outcome" scenario, potentially driving oil futures to $120-$130 per barrel. Now, with geopolitical tensions seemingly de-escalating, JPMorgan forecasts oil prices to remain in the low-to-mid-$60 range for the remainder of 2025, assuming continued mitigation of Middle East risks. This outlook aligns with their assessment of "sufficient oil worldwide" based on fundamental supply-demand dynamics.
