Markets have been cheered by news of the two-week ceasefire between the US, Israel and Iran. However, this excludes Lebanon, where Israel has carried out its biggest wave of air strikes today since the war there began on 2 March.

Iran has agreed to reopen the strait of Hormuz, where around 1,000 ships have been trapped. A senior Iranian official told Reuters Tehran could open the key shipping route on Thursday or Friday ahead of peace talks in Islamabad.

Brent crude, the international oil benchmark, has tumbled 15.5% to $92.28 a barrel, down nearly $17. As is stands, it is on track for its biggest daily drop since April 2020, the start of the Covid pandemic, when the price fell 24%.

UK gas prices have tumbled 18%, taking the May delivery contract 24.3p lower to 110.67p per therm.

Stock markets have rallied around the world, starting in Asia where Japan’s Nikkei leapt 5.4% and South Korea’s Kospi soared 7.5%. Over here, the FTSE 100 in London is 275 points, or 2.66% ahead at 10,623. Germany’s Dax jumped 5.2%. On Wall Street, stocks surged to one-month highs. The Dow Jones has gained 2.5% while the S&P 500 has risen 2.2% and the Nasdaq climbed 2.8%.

The dollar is on the backfoot, sliding 1.1% against a basket of currencies. Sterling gained 1.2% to $1.3451.

Government bond yields have plummeted around the world, as traders scaled back bets on interest rate hikes. In the UK, borrowing costs fell the most in three years, measured by the yield (or interest rate) on two-year gilts, as government bonds are known.

Bond yields are sensitive to inflation prospects and have closely tracked oil prices.

Our main stories today:

Thank you for reading. We’ll be back tomorrow. Take care (and enjoy the sunshine!) – JK

There will be no “mass exodus” of ships through the strait of Hormuz, shipping analysts say, despite a two-week conditional ceasefire being agreed between the US and Iran with provision for the temporary reopening of the crucial maritime channel.

The ceasefire agreement “doesn’t change the situation in the sense that Iran is still in control”, said Richard Meade, the editor-in-chief at the maritime data provider Lloyd’s List Intelligence. “It still requires ships to essentially seek permission, and that’s the key. That means that nothing has changed – no permission, no transit.”

An estimated 2,000 ships and 20,000 seafarers have been trapped in the Gulf since the outbreak of war at the end of February, according to the UN, unable to pass through the strait to continue their journeys.

The International Monetary Fund has said the “economic scars” of war could take more than a decade to recover from, as it warned governments around the world will face hard choices to boost defence spending.

After the news of the Iran ceasefire, and ebullient reaction in financial markets, the IMF has published a timely report that could douse some of that enthusiasm.

Indicating that things could still take quite a while to patch together again, the fund notes the economic costs of war typically exceed those associated with financial crises or severe natural disasters. Economics scars also persist even a decade later.

When conflict ends and gives way to a durable peace, economic recovery is possible, but it is neither automatic nor rapid.

Publishing a report ahead of its annual spring meetings in Washington next week, the IMF research based on conflicts since 1946 shows that “conflict site” countries – perhaps unsurprisingly – suffer particularly steep economic declines. But other countries can still feel the pain for a lengthy period of time afterwards.

While much of the scarring comes from the damage to infrastructure, human toll, and the financial repair job, the IMF also warns peacetime can be tougher to maintain after periods of conflict, depressing investment intentions amid the cloud of uncertainty.

In pre-released chapters of its World Economic Outlook report, due next week, it says economic output typically rebounds after the last bombs fall, but remains modest relative to wartime losses.

The analysis is about wars generally. But passages of the report highlight the potential consequences of the uncertainty over the situation in the Middle East - which analysts reckon could cast a lasting shadow over the global economy.

Persistent political and economic uncertainty despite peace can continue to depress expected returns on investment, sustain capital outflows, and constrain both investment and labor supply.

Meanwhile the fund warns governments face “hard choices” to raise spending on defence. Amid the clamour to do so, there are three choices: higher borrowing, tax hikes, or a “guns versus butter” trade-off involving cuts to social protection, health and education.

For the UK and other Nato members committed to spending 5% of GDP on defence by 2035, it is a sobering reminder that boosting defence spending is not as easy as some make it out to be.

The IMF also cautions that a defence boom does not automatically translate into an economic one. Nations which stimulate their domestic defence manufacturing capacity can benefit. But, typically, buying guns, ammo and associated kit involves boosting imports from places with existing capacity (NB: Mostly the US).

Nearly half of total arms revenue among the world’s top 100 arms-producing firms is generated in the United States, while Europe accounts for about 14% and China 12%. As a result, most countries import a large share of their military equipment, with this ratio as high as 80% for European Union member countries.

Travel stocks are leading the risers on Wall Street.

Cruise operator Carnival is leading the S&P 500 gainers, up almost 14%.

They’re followed by Southwest Airlines (+13.4%) and United Airlines (+13.4%).

But oil company stocks are sliding, following the plunge in crude prices today. Exxon Mobil are down 7.7%, and ConocoPhillips have lost 8.3%.

The New York has joined the global relief rally, as traders on Wall Street cheer the US-Iran ceasefire.

The Dow Jones Industrial Average has surged by 1,325 points at the start of trading, up 2.85% to 47,909 points.

The broader S&P 500 index is up 2.5%, and the tech-focused Nasdaq 100 is up 3.5%.

Despite the ceasefire, UK inflation could still rise to double the Bank of England’s 2% target by the end of the year.

So warns Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, who points out that some economic damage has already been done:

“Even in a best case scenario it will take months for energy and other supply chains to return to anything resembling normal. At the same time, an elevated risk premium will remain in energy and commodity prices for a long time, reflecting the greater risk that hostilities restart. That is enough to avoid the worst case scenario of shortages and rationing in Europe, which would have caused a recession. But it still means that even though financial markets have rallied today, the economic damage will persist through this year.

“For the UK, the ceasefire probably comes too late to avoid another bout of stagflation. First, energy prices at current levels are still enough to push inflation to 3% by the end of the year. And the DMP and PMI surveys both suggest that firms are intending to pass on cost increases. If we add in indirect and second round effects from higher shipping and raw material costs, it is easy to get to inflation of around 3.5%-4.0% by the end of the year.

The US-Israeli ceasefire with Iran is unlikely to lead to a swift exit for the hundreds of oil and gas tankers trapped in the Gulf, according to shipping experts.

One seafarer, who is aboard an oil tanker stranded behind the strait of Hormuz, told the Guardian that shipping companies would require more certainty before they attempt to transit the strait.

They said:

“We’re at anchor, near dozens of loaded tankers. No-one has moved an inch.”

The seafarer said that bulk carriers, loaded with dry bulk such as cars and containers, had begun to move towards the Gulf but that major shipping companies would be unlikely to move oil and gas tankers without the go-ahead from insurance companies.

“No reputable company, with any links to EU countries, will risk moving without Lloyds and major insurers saying that they can,” they said.

“Transiting the strait will require more certainty; insurers will need to agree to insure these cargoes and there would need to be a better understanding of how to pay “toll fees” to a country which is still officially sanctioned,” they added.

It will take several days before the impact of the truce on shipping becomes clear, according to Torbjorn Soltvedt, an analyst at risk intelligence company Verisk Maplecroft.

Soltvedt said:

“Before the war, daily transits through the Strait of Hormuz exceeded 100 ships per day and any increase from the trickle of ships currently passing the strait is likely to be gradual.

“Two weeks will not be enough to clear the backlog even if there is a marked increase in traffic.”

Donald Trump is now threatening 50% tariffs on any country supplying weapons to Iran.

In a post on Truth Social, he writes:

A Country supplying Military Weapons to Iran will be immediately tariffed, on any and all goods sold to the United States of America, 50%, effective immediately. There will be no exclusions or exemptions! President DJT

UK businessman Ian Cheshire has been named as the new chair of Ofcom, the media regulator that has a growing remit of protecting users of online platforms from harm.

The government said it had picked Cheshire, who chaired broadcaster Channel 4 until last April and is also a former chief executive of B&Q owner Kingfisher, which he ran from 2008 until 2015, and a former chair of Barclays Bank UK.

He will replace Michael Grade, the former chair of the BBC, who will stand down at the end of April.

Cheshire currently chairs the property developer Landsec and the private hospital operator Spire Healthcare.

Technology secretary Liz Kendall said

Sir Ian has a proven track record of leading complex organisations through periods of significant change, and that is exactly the kind of leadership Ofcom needs right now

Also today, UK construction firms reported the biggest-ever rise in cost inflation from one month to the next in March, while the Iran war hit new orders and confidence in the sector.

New orders recorded by construction firms fell at the fastest pace since November last year and a recent improvement in expectations for future output among businesses faded, according to a closely watched monthly survey from S&P Global.

Business activity in the sector continues to decline. Its UK construction purchasing managers’ index (PMI) headline reading remained below the 50.0 growth threshold for the 15th month in a row, although it edged up slightly to 45.6 from 44.5 in February. Any reading below 50 indicates contraction.

The measure of input cost inflation leapt to 70.5 from 59.5 in February, the biggest jump since the series began in 1997.

Last week, British manufacturers reported the biggest month-on-month jump in cost inflation since October 1992.

The most recent official construction data showed a 0.2% rise in output in January after shrinking 2% in the final quarter of 2025.

Tim Moore, economics director at S&P Global Market Intelligence, said some businesses reported a turnaround in infrastructure work, especially in the energy sector, but the near-term outlook for the sector as a whole was challenging.

Rising inflation pressures, gloomy economic prospects and higher borrowing costs are the main worries for construction companies, while shipping delays caused by disruption in the Strait of Hormuz meant supply chain performance worsened for the first time since mid-2025.

The all-sector PMI – which includes manufacturers and services firms, which have reported similar fallout from the war in Iran – dropped to 49.9 from 52.9 in February, its lowest level since last September.

Ten ships have passed through the strait of Hormuz so far today, four of which are Iranian, according to the French global marine data tracker AXSMarine.

There is no expectation that flows will return to anywhere near normal today as all ships must have permission from the Iranians and the shipping industry remains cautious, it said.

In peacetime, between 50 and 100 ships would pass in either direction through the straits with the war reducing that to between two and seven vessel movements a day in the last two weeks after the Iranians gave the green light to certain national flag carriers.

AXS Marine said.

Initially, Iran announced that ships owned by five nations (China, Russia, India, Iraq and Pakistan) would be allowed to transit. Malaysian and Thai vessels were granted access after diplomatic talks. On 2 April, Iran said it would allow Philippine-flagged vessels to cross following further negotiations.

Today’s decline in oil prices is the biggest since the pandemic – but analysts say a return to pre-war levels will take time.

Brent crude has plunged 15.1% to $92.82 a barrel on news of the two-week ceasefire, down $16.5 on the day.

This is the biggest daily fall in percentage terms since the onset of the Covid pandemic in April 2020, when the price of oil slumped 24%.

The fall reflects relief that the 1,000 oil and gas tankers and cargo ships that have been trapped in the Gulf since late February can finally begin moving.

However, markets are expecting Brent to remain above $70 per barrel through 2027. The global oil benchmark was trading at around $72 a barrel before the US and Israel launched air strikes on Tehran on 28 February.

James Hosie, equity analyst at Shore Capital said:

A two-week ceasefire agreement between the US, Israel and Iran including the opening of the strait of Hormuz marks a welcome step back from the threatened escalation of the conflict. Oil markets reflect that relief with near-term Brent prices dropping c.15% overnight. Even if this ceasefire becomes a more lasting peace agreement, we do not expect oil and gas prices to return to their pre-conflict levels as it will take time for industry operations in the Persian Gulf to normalise.

There appears to be little or no trust between Iran and the US/Israel at this stage.

Based on the statements by each government, there are differing interpretations on the precise scope of the ceasefire that creates a significant risk that ongoing negotiations end with a resumption of the conflict, in our view.

It remains to be seen whether last night’s announcements are enough to give vessel owners and insurers the confidence required move through the Strait.

A return to normality will take time, he said.

The flows of oil, LNG and oil products from the Persian Gulf cannot quickly spring back to pre conflict levels. The damage to energy facilities across the Gulf combined with production shutdowns (both precautionary and due to storage constraints) means that supply could remain constrained for several months, even if this two-week ceasefire ends with a permanent peace deal.

We expect that to support the outlook for oil & gas production businesses with operations outside the region.

Europe’s leading share index is on track for its best day in four years.

The pan-European Stoxx 600 index has risen by just over 4%, its biggest daily increase since 9 March 2022.

The German Dax has notched up the biggest increase among major European stock markets, up 4.9%, while France’s CAC has jumped 4.5% and Italy’s FTSE MiB is up 4%.

The FTSE 100 in London is 302 points ahead at 10,651, up 2.9%.

In Asia, South Korea’s Kospi had led the way with a 7.5% daily jump, followed by Japan’s Nikkei with a 5.4% increase and the CSI 300’s 3.5% gain in China.

Delta Air Lines has cut its profit outlook for the second quarter and pulled its growth plans.

The US carrier said it was too early to update its full-year outlook, citing uncertainty caused by the surge in jet fuel prices since the start of the Iran war in late February. Jet fuel prices have nearly doubled, inflating airlines’ costs and prompting them to trim schedules.

The Atlanta-based airline forecast lower-than-expected profit for the April to June quarter, and said it was removing all planned capacity growth from that quarter, which will cut capacity by 3.5 percentage points.

Delta added its capacity growth plans now have a “downward bias until the fuel environment improves”.

Fuel accounts for about a quarter of airline operating costs. The surge could lead to an industry shakeout, with weaker airlines more likely to cut capacity, take on debt or absorb deeper losses.

Delta chief executive Ed Bastian said:

It’s going to separate the winners and force the weaker players to take some pretty significant steps to either get better or something else will happen.

Delta now expects adjusted earnings of $1.00 to $1.50 per share in the June quarter. It expects to pay $4.30 a gallon for jet fuel in the quarter, adding more than $2bn to its fuel costs compared with a year earlier.

So far, airlines have relied on strong travel demand to recoup part of the higher fuel bill through fare increases, baggage fees and other ancillary charges. Bastian said Delta aims to recover about 40% to 50% of higher fuel costs in the second quarter by lifting fares. It also plans to raise fees to check in bags, following in the footsteps of rivals United Airlines and JetBlue Airways.

Bastian indicated that the higher fees could be permanent.

At this level of fuel, it’s hard to call anything temporary.

He played down concerns that higher fares and fees could weigh on demand, saying ticket sales have risen in double digits year on year over the past month.

The RAC motoring group has warned that despite the sharp drop in crude oil prices today, the outlook for drivers in the UK remains “highly uncertain”.

The average price of a litre of unleaded is now 157.71p, up 25p or 19% since the war began. Diesel has exceeded the 190p mark, costing an average 190.62p a litre and is up 48p, or 34% since the Iran war started on 28 February. Both fuels are at their most expensive since late 2022.

RAC head of policy Simon Williams said:

The conditional ceasefire announcement may have taken some heat out of global oil prices, but the outlook for drivers in the UK remains highly uncertain. The best hope in the short term is that pump prices stop rising at the rate they have been and hopefully top out in the coming days.

Much will depend on the stability of the ceasefire, whether oil shipments can move freely through the strait of Hormuz, and the longer‑term impact on oil production across the Gulf. As it is a sustained lower oil price – over several weeks, not just a few days – that is required to bring wholesale fuel costs down meaningfully.

Drivers should not expect significantly cheaper fuel in the short term, although some smaller independent forecourts buying on a ‘spot’ basis may be quicker to pass on any reductions.

Williams recommended that drivers shop around for fuel.

Shell is expected to report “significantly higher” profits from its commodity trading desks in the first quarter of this year after weeks of market volatility triggered by the Iran crisis.

The surge in energy commodity markets over recent weeks is expected to drive up trading results at Shell’s chemicals and products unit, which includes its main oil trading desk.

Shell’s trading windfall is expected to be particularly high in its renewable energy division. Earnings are expected to soar to between $200m (£149m) and $700m in the first quarter, from about $100m in the final quarter of last year, it predicted in a trading update on Wednesday.

Europe’s biggest oil and gas producer also expects lower gas production for the first quarter, compared with the final quarter last year, because of the impact of the Middle East conflict on its assets in Qatar.

The Lloyd’s market, which is at the heart of global shipping insurance, has cautiously welcomed the ceasefire.

Neil Roberts, head of marine and aviation at the Lloyd’s Market Association, which represents managing agents in the world’s oldest insurance market, said:

From an insurance point of view, the ceasefire is of course welcome. Time will tell whether it is a pause or a peace but, in the meantime, it is highly unlikely that trade into the Gulf will simply resume. The region remains at heightened risk with none of the underlying tensions resolved.

The losses already advised will be dealt with as normal and it can be expected that the ships previously unable to leave will now try to do so as soon as the owners and master deem it is safe to do so.

Like everyone else, we can only await developments. Whatever happens, the London insurance market will continue to support its clients.

Neil Shearing, chief economist at Capital Economics, said Iran’s plan to charge transit fees for ships to pass through the strait of Hormuz would only have a modest impact on global energy priced but would amount to a “de facto nationalisation of the shipping route”.

There are significant hurdles to overcome before the ceasefire agreement between the US, Israel and Iran can translate into a lasting end to the war. But if it were to hold, it would move outcomes closer to those envisaged in our “baseline” forecast. In that scenario, oil prices decline but still end the year at $80 a barrel, headline inflation rises to around 3-4% year-on-year in the US and Europe and, while GDP growth slows in most major economies, the overall economic damage outside of the region remains limited.

Talks between the US and Iran, on the basis of Tehran’s 10-point framework, which Washington has apparently accepted as a starting point, are expected to begin in Islamabad on Friday. The plan contains several provisions that are likely to prove difficult for both sides.

These include acceptance of Iran’s continued uranium enrichment, a demand that US/western sanctions on the country be lifted, and the withdrawal of US forces from all bases in the region. Shearing said:

It is difficult to see these points being agreed to in full. Some compromise will be required and, without it, there’s a good chance the agreement will fall apart and the conflict resumes.

Turning to markets, Shearing said:

For markets, the most critical issue remains the status of the strait of Hormuz. The framework appears to allow the full passage of oil tankers through the strait, but the terms under which this would occur remain unclear. Some reports suggest the introduction of transit fees of around $1m–2m per tanker.

Given that tankers typically carry 1m–2m barrels of crude, such fees would add roughly $1 per barrel to the cost of oil transported through the Strait. This would therefore have only a modest impact on global energy prices though, in practice, it could amount to a de facto partial nationalisation of the shipping route.

If these issues can be resolved and a deal is reached, we would get closer to Jefferies’ baseline scenario, which assumes the conflict de-escalates by the end of this month and energy flows through the strait resume along the same timeframe.

Even in that scenario, however, there would still be some economic damage. The impact would be most severe in the region itself, where we estimate that GDP could contract by around 10% in the countries most directly affected. The long-lasting damage to LNG facilities in Qatar means it could be disproportionately affected.

Meanwhile, although oil and natural gas prices have fallen sharply today, they are likely to remain elevated relative to earlier in the year. In our baseline forecast, Brent crude averages around $95 per barrel in the second quarter before easing towards $80 by the fourth quarter.

Inflation in the major advanced economies also has further to rise. We expect it to peak at around 4.5% in the UK and between 3.5% and 4% in the US and the euro-zone. US inflation data due later this week will provide an early indication of how quickly those pressures are building.

Finally, the rate hikes currently priced into markets may prove excessive. If energy prices stabilise and growth holds up better than feared, central banks are unlikely to deliver the tightening now priced into markets, which in turn would flatten the front end of yield curves. Equity markets are likely to ebb and flow according to developments in the talks over the next couple of weeks but in our baseline scenario a recovery in risk appetite pushes the S&P 500 above 7,000 by the middle of the year.

European gas prices have fallen 20% since the ceasefire was announced, after nearly six weeks of war.

The European bellwether front-month gas contract on the Dutch TTF hub initially dropped to €42.50 per megawatt hour this morning, its lowest since 2 March, before rising slightly to €43.46 per megawatt hour.

The UK natural gas contract for May fell by nearly 18% to 111.04p per therm.

Iran has agreed to reopen the strait of Hormuz, through which around a fifth of the world’s gas and oil passed prior to the war, assuming there are no more strikes from the US and Israel.

Henning Gloystein, managing director of energy and resources at the political risk consultancy Eurasia Group, said:

The first thing to see is whether ships can safely pass through the strait of Hormuz.

If they pass freely, it’s possible that Qatar starts repairs to its Ras Laffan facilities, but I don’t think they can ramp up production within the two-week ceasefire window.

The waterway has remained effectively closed since the US and Israel launched strikes on Tehran on 28 February. A retaliatory Iranian strike on Qatar’s Ras Laffan LNG (liquefied natural gas) hub on 18 March knocked out an estimated 17% of export capacity.

Yahdian Falah, senior portfolio manager at trading firm Trianel told the European energy market newswire Montel News:

This is a strong relief and could be the turning point for the global gas market to rebalance.

The ceasefire removes risk of further damage to infrastructure, while reopening the Strait of Hormuz will bring volumes back into the market.

However, “further elimination of risk premium” would be subject to evidence of increased traffic through the strait, he added.

ANZ bank analysts said in a note:

Even if shipping routes reopen, missing Qatari output cannot be replaced quickly, leaving the market to clear through higher prices, inventory drawdowns and demand rationing.

The FTSE 100 index has risen to the highest level since the Tuesday after the US and Israel started attacking Iran in late February.

The UK’s benchmark index rose as high as 10,655.92 this morning, and is now trading 2.4% higher at 10,603, up 253 points. This is the highest since 3 March, the fourth day of the war.

Stock markets in the rest of Europe have jumped even more. Germany’s Dax soared 5.2% to 24,118, up 1,194 points. France’s CAC jumped 4.45% to 8,260, up 352 points. Italy’s FTSE MiB has gained 3.5% to 47,016, up 1,601 points. Spain’s Ibex climbed 3.5%, or 608 points to 18,053.

Matt Britzman, senior equity analyst at Hargreaves Lansdown said the ceasefire gives Donald Trump “a clear offramp and lowers the immediate risk of further escalation”.

The FTSE 100 has opened 2% higher, while US futures are pointing to an even larger jump when markets open later this afternoon. The S&P 500 notched its fifth consecutive positive session last night, with the index now on track to record a six-day winning streak if it can hold on to pre-market gains, something not seen since October 2025.

Oil prices have moved sharply lower as the ceasefire agreement marks the first meaningful step toward a potential resolution. News that all parties are now working toward reopening the Strait of Hormuz is another clear positive for market sentiment, even if energy markets remain cautious. There is still work to be done, though, and oil prices will likely remain elevated and choppy until there is a more permanent resolution. The return of free-flowing traffic through the Strait of Hormuz, without any Iranian tolls or controls, feels essential if oil prices are going to start trending back toward levels we saw before the conflict began.

Interest rate expectations have shifted slightly following the ceasefire, bringing markets back toward the view that further US tightening is off the table. Investors are now becoming more comfortable, tentatively pricing in the potential for rate cuts to resume toward the end of this year or into early 2027.

In the UK, markets are still attaching some probability to another hike, although conviction has faded meaningfully in recent sessions. We still see rate hikes as unlikely, given lingering growth concerns, with a holding pattern more probable for now. Further moves in this direction, and perhaps an eventual return to expectations of rate cuts, would be supportive of both stock markets and gold.

The Danish shipping giant Maersk has issued a cautious statement, saying the two-week ceasefire between the US and Iran including the temporary reopening of the strait of Hormuz does not yet provide full maritime certainty.

The war that began with US-Israeli strikes on Iran on 28 February, followed by Iranian attacks across the region and Tehran’s effective closure of the strait, has brought shipping in the Gulf to a near standstill, disrupting oil, gas and fertiliser shipments and rippling across global supply chains.

Maersk said in a statement to Reuters:

Any decision to transit the strait of Hormuz will be based on continuous risk assessments, close monitoring of the security situation, and available guidance from relevant authorities and partners.

At this point, we take a cautious approach, and we are not making any changes to specific services.

And we’re off. The FTSE 100 index has jumped 273 points, or 2.6%, to 10624 in early trading.

There are only three fallers: oil companies BP and Shell, down by 8.3% and 7.3% respectively, and British Gas owner Centrica, down 3.5%.

Interest rate expectations have shifted dramatically, and government bond yields have fallen sharply.

Markets are now pricing in one interest rate hike from the Bank of England this year, probably by September.

Last week, investors were expecting two to three rate increases to rein in rising inflation. It’s still very different from before the war, when the Bank was expected to cut interest rates.

UK government bond yields plummeted on news of the ceasefire as rate hike expectations receded, with the yield, or interest rate on the 10-year gilt down 18 basis points. The five-year yield dropped by 20 basis points.

Sterling has also risen sharply, by 0.9% against the dollar, to $1.3416.

Eurozone government bond yields also plunged as traders scaled back bets on future rate rises from the European Central Bank. Markets are now pricing in a 20% chance of a rate hike in April, compared with 60% on Tuesday, before the dramatic announcement of a US-Iran ceasefire overnight.

The yield, or interest rate, on Germany’s 10-year government bond fell 18 basis points to 2.91%.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Oil prices plunged more than 15% below $100 a barrel, Asian stocks surged and the dollar slumped after the US and Iran agreed a two-week conditional ceasefire on Tuesday evening, including a temporary reopening of the strait of Hormuz.

Investors breathed a sigh of relief, and Brent crude, the global oil benchmark, fell by more than $15 to $93.82 a barrel in early London trading. It reached a low of $91.7 a barrel in Asian trading – but remains much higher than before the US and Israel launched attacks on Tehran on 28 February, when it traded around $72 a barrel.

Japan’s benchmark Nikkei 225 jumped 5.45%, the Australian market climbed 2.55% and South Korea’s Kospi soared 7.7%. Elsewhere, Hong Kong’s Hang Seng surged 3%, while the Shenzhen Composite in China rose just over 4%.

European stock futures are pointing to a strong rally when markets open soon, with Germany’s Dax seen rising more than 5% and the UK’s FTSE 100 up nearly 3%.

The dollar fell more than 1% against a basket of major currencies. Spot gold rose 2.6% to $4,825 an ounce.

After a last-minute diplomatic intervention led by Pakistan, Donald Trump held off on his threat to bomb Iran “back to the stone ages” and wipe out “a whole civilization”.

With less than two hours to go until his ultimatum of 8pm Eastern time, the US president said a ceasefire agreement had been mediated through Pakistan, whose prime minister, Shehbaz Sharif, had requested the two-week peace in order to “allow diplomacy to run its course”.

Trump wrote in a post that “subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz, I agree to suspend the bombing and attack of Iran for a period of two weeks”.

Soon after, Iran’s national security council confirmed it had accepted a two-week ceasefire under the management of its military if attacks against Iran were halted. Tehran said peace negotiations with the US would begin in Islamabad on Friday.

However, there is still much uncertainty about the outcome of the talks, how the strait of Hormuz will be managed and what will happen to shipping after the two-week period ends.

Charu Chanana, chief investment strategist at Saxo Bank in Singapore, said:

Markets were positioned for a much worse outcome, so the relief rally in equities, FX, and oil makes sense. This is the market unwinding some of its disaster hedges.

The ceasefire does not resolve all the underlying risks. Investors still need clarity on whether hostilities truly stop, whether Hormuz remains reliably open, how quickly disrupted energy supply can recover, and whether the 10 April talks in Islamabad produce real progress.

For macro and rates, the worst immediate inflation shock has eased, so markets can start to put some rate cuts back on the table. But I would not assume they simply return to the exact same pricing as before the war, because shipping, insurance, and supply-chain disruptions may take longer to normalize.

Tactically, the Iran playbook may now be flipping. Relief-sensitive areas such as airlines, consumer discretionary, selected cyclicals, and broader risk assets could benefit if de-escalation holds. Structurally though, I still think investors should balance growth and AI exposure with energy, supply-chain resilience, hard assets, and national-security themes.

The Agenda

• 8.30am BST: Eurozone construction PMI for March

• 9.30am BST: UK construction PMI for March

• Noon BST: US mortgage applications