In 24 hours, markets have shifted from pricing in a potential “geopolitical black swan” to opening with broad gains—for example, in Europe, Germany’s DAX rose 5% and the UK’s FTSE 100 about 2%—and oil futures falling by approximately 14%, bringing Brent crude back below $100 per barrel (around $94). In addition, the US dollar index has dropped by around 1%, with the euro/dollar exchange rate returning above the 1.17 level for the first time since the start of the war. The reason is clear: there is a sense of relief following the announcement of a temporary ceasefire between the U.S. and Iran, as energy risk has decreased.
For markets, the key aspect of this agreement points to a “full, immediate, and secure reopening of the Strait of Hormuz,” although it remains to be seen how this will materialize. “Markets do not need absolute certainty to rebound; for markets, a ceasefire significantly reduces the risk of escalation in the short term. That reduction in tail risk is often enough to trigger a rapid repricing, even if long-term uncertainties persist,” says Ray Sharma-Ong, Deputy Global Head of Multi-Asset Custom Solutions at Aberdeen Investments.
For Matthew Ryan, Head of Market Strategy at Ebury, the word that describes markets today is relief. “Attention is now turning to the next critical negotiations between the United States and Iran. The key question will be whether these talks achieve lasting peace or whether Tuesday’s ceasefire has merely postponed the issue,” he states. In his view, market participants will not fully commit to “risk-on” trades, nor will oil futures or the dollar return to pre-war levels until a permanent agreement is reached. “As things stand, this remains only a temporary pause in the war, and despite the ceasefire, the dollar is still trading about 1% higher than before the conflict,” he notes.
Toward a Rebound
For his part, Sharma-Ong argues that today’s market moves have been seen before: “On April 9, 2025, the S&P 500 surged 9.5% in a single session after Trump announced a 90-day pause on reciprocal tariffs introduced on April 2, 2025. At that time, as in the current situation, several major uncertainties remained. However, the removal of extreme downside risk was enough to trigger a strong rebound.”
With this in mind, the Aberdeen expert ventures to say that in the following months, “markets surpassed previous highs.” “The relief rally is expected to be stronger in North Asia. Fundamentals will return to center stage, and these—not geopolitics—will lead markets if the geopolitical risk premium fades. In addition, we expect a stronger rebound in markets that were most affected by the oil crisis and the rise in risk aversion. Asian equity markets that are more dependent on oil imports, particularly Korea, Taiwan, and Japan, are likely to recover more quickly. These markets are more exposed to fluctuations in energy prices and global risk sentiment,” adds Sharma-Ong.
From an investor perspective, Michaël Nizard, Head of Multi-Asset and Overlay at Edmond de Rothschild AM, believes the key issue will be assessing macroeconomic impacts, particularly on growth, inflation, and monetary policy dynamics. “Although the risk of recession is not yet imminent, the effects will be clearly in the eurozone. Indeed, this geopolitical shock in the Middle East acts as an energy supply shock, reigniting global inflationary pressures and directly affecting growth. The rise in oil and gas prices is particularly harmful for Europe, whose industry remains dependent on these resources, increasing the risk of a loss of competitiveness,” he states.
However, Nizard considers this context different from that of 2022, when the global economy simultaneously faced a supply shock and excess demand linked to savings accumulated during the pandemic and large government fiscal stimulus: “The labor market is not under the same severe strain as in 2022. For all these reasons, we believe central banks should act cautiously and avoid overreacting to the rise in inflation in the coming months. A lower risk of monetary policy mistakes will also act as a tailwind for risk assets, both in equities and in the corporate debt market.”
The Energy Question
Another clear conclusion following the agreement is that energy markets may have passed the supply shock peak. “In line with our oil analyst’s view, energy markets have likely moved past the peak of the supply shock, as prices had already reached economically damaging levels, which typically trigger de-escalation dynamics,” highlights Christian Gattiker, Head of Research at Julius Baer.
In fact, this ceasefire comes at a time when energy markets were already showing initial signs of stabilization. “Even at the height of tensions, the scenario was never one of a total supply disruption, but rather of a partial and shifting opening. As highlighted in recent days, transport flows through the Strait of Hormuz have continued to increase, supported by Iran-protected routes and greater international involvement. Although still below pre-conflict levels, these flows—along with alternative export channels—have mitigated the supply shock and given energy supply chains room to adjust. This resilience is key,” adds Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer.
According to Fidelity International, despite the drop in Brent prices on April 8, energy markets are unlikely to quickly return to pre-conflict price levels, as geopolitical premiums are likely to persist. “We assume that Brent will trade around $85 for the rest of the year following any resolution. In addition, risks to supply chains beyond energy markets imply that this shock will not disappear immediately. This impact will be felt most strongly in Asia, due to direct exposure to the Strait, followed by Europe. Despite being relatively insulated from the direct impact of this conflict, the United States will also feel the effects of the global macroeconomic shock and higher global energy prices,” they state in their latest analysis.
What Now
All this market optimism and the views of investment experts come with a warning: risk and volatility have not completely disappeared. “The ceasefire fits well within the established pattern of geopolitical crises, where an intense escalation phase creates the conditions for an eventual exit. This supports our base case of a fast and intense shock, with limited lasting damage to global energy supply. Although geopolitics in the Middle East will remain present, we expect energy markets to gradually decouple from political noise, reducing the risk of a sustained oil-driven macroeconomic shock. However, investors should be cautious in interpreting this as a definitive resolution. The conflict continues to follow a ‘reality show pattern,’ characterized by rapid escalations, tactical pauses, and renewed tensions,” warns Gattiker.
Experts clearly agree that the durability of a ceasefire and any conditional agreement that follows remains uncertain. There is also some skepticism that the United States or Israel will accept the 10-point conditions proposed by Iran, particularly as it seems unlikely that the U.S. would end its military presence in the Gulf.
“If the two-week ceasefire holds and some form of agreement is reached that allows the reopening of the Strait, the global economic impact of this conflict will be manageable. We would view this as a temporary price disruption that may not affect consumers or businesses in some economies. In that case, central banks could broadly resume the path they were on before the conflict. In fact, if commodity prices normalize quickly, attention could shift more toward the impact on growth,” explains Michael Langham, Emerging Markets Economist at Aberdeen Investments.
Fidelity International adds one final reflection: “Our view remains that the most likely outcome is a disorderly resolution, with geopolitical risk premiums likely to persist in the days following the war. Tail risks remain elevated, with an active risk that we could find ourselves in a situation where the parties continue to have incentives to escalate again in order to de-escalate, which entails clear asymmetric risks. Although we are likely closer to the end than the beginning of this conflict, high uncertainty persists. Meanwhile, market stress remains clearly visible in some channels.”
