Former US President Donald Trump announced on Monday that Israel and Iran have reached a complete ceasefire. This announcement immediately impacted the international energy market, particularly causing a significant drop in crude oil prices.
Monday brought major news to global markets when former US President Donald Trump announced that Iran and Israel had agreed to a ceasefire. This marks a historic development after 12 days of military conflict, easing tensions in West Asia and significantly impacting the global economy.
The most immediate reaction to this peace agreement was seen in crude oil prices. Oil prices fell by 9 percent on Monday alone; after the ceasefire announcement, they dropped a further 4 percent, with Brent Crude reaching $65.75 per barrel.
Trump's Major Announcement: War to End Completely Within 24 Hours
In a statement released from the White House, former US President Donald Trump stated that Iran and Israel had agreed to a full and comprehensive ceasefire. Trump added that if both sides maintained peace for 24 hours, the war would be officially considered over.
This announcement is being viewed as a diplomatic success for the United States on the global stage. The 12-day conflict had caused significant volatility in global markets, especially in the energy sector. Now, with the ceasefire confirmed, stability is expected to return to trading activities.
Turmoil in the Oil Market, Fears of Supply Disruption Now Eliminated
Iran, OPEC's third-largest oil producer, faced potential export restrictions or military strikes during the conflict. This led to a sharp surge in oil prices. Now, with the ceasefire in effect, the market is confident that Iran will be able to resume its oil production and exports normally.
Tony Sycamore, an analyst at IG, stated, "The news of the ceasefire has made it clear that the risk premium attached to crude oil prices has almost entirely disappeared."
Stock Markets Rise, Dollar Weakens
The ceasefire announcement also positively impacted global stock markets. The S&P 500 in the US rose by 0.3 percent, and the Nasdaq by 0.5 percent. Japan's Nikkei index reached 38,905, significantly higher than the previous day's 38,354.
Conversely, the dollar index weakened. The dollar fell by 0.1 percent against the Japanese yen to 145.92 yen, while the euro rose by 0.1 percent to $1.1589. Analysts attribute the dollar's weakness partly to investors shifting from safe haven assets to riskier assets following the easing of the crisis.
Relief for Europe and Japan
The drop in crude oil prices will benefit countries heavily reliant on oil imports, such as Japan and the European Union. This will lower production costs and help control inflation.
Experts suggest that both Japan and Europe were struggling economically due to high import bills. The lower oil prices are expected to provide relief to their economies. Conversely, the US, now a major oil exporter, may experience some losses due to lower prices.
Impact on India
As the world's third-largest oil importer, India stands to benefit directly from the decline in crude oil prices. Stability in petrol and diesel prices will make it easier to control retail inflation and improve the current account deficit.
The government will also receive assistance in reducing the fiscal deficit and easing pressure on the rupee. Furthermore, relief is expected in airfares and logistics costs, benefiting the general public.
Will Peace Prevail?
Despite the ceasefire, international analysts question its permanence. West Asia has seen numerous ceasefires that have subsequently broken down. However, given the diplomatic involvement of major powers such as the US, Russia, and China, there is hope that this peace may endure.
