Asian shares soared in Wednesday morning trading after the U.S. and Iran reached a two-week ceasefire agreement, with the Strait of Hormuz set to reopen. The announcement triggered a dramatic drop in oil prices, with U.S. crude futures falling more than 15% and benchmark U.S. crude sinking $16.84 to $96.11 a barrel. Brent crude dropped $14.51 to $94.76 a barrel. As reported by AP News, the gains across Asian benchmarks reflected immediate relief at the prospect of oil flows resuming through the waterway.
The positive ripple was felt broadly across the region. Japan’s Nikkei 225 jumped 5.0% to 56,106.18 in early trading, while South Korea’s Kospi gained 5.9% to reach 5,819.97. Australia’s S&P/ASX 200 rose 2.6% to 8,952.30, Hong Kong’s Hang Seng climbed 2.6% to 25,767.42, and the Shanghai Composite added 1.7% to 3,957.55.
The ceasefire came after President Trump announced late Tuesday that he was suspending planned attacks on Iranian bridges, power plants, and other civilian targets. The decision followed an intervention by Pakistan’s prime minister, who urged Trump to extend his deadline by two weeks and asked Iran to open the Strait. Iran’s foreign minister confirmed that passage through the Strait would be permitted for the next two weeks, though it would remain under Iranian military management.
This is the largest oil supply disruption the world has ever seen
The Strait of Hormuz closure began when military conflict with Iran started on February 28, 2026, and quickly blocked most oil produced in the Persian Gulf from reaching export markets. Initially driven by war-risk insurance concerns for tankers, the disruption escalated as the threat of attacks on shipping made transit economically unsustainable.
Oil producers including Iraq and Kuwait curtailed output in early March once local storage filled up, and a near-complete halt of Gulf exports removed close to 20% of global oil supplies from the market. Around 80% of that oil typically flows to Asia, making resource-dependent nations like Japan especially exposed. Trump’s handling of the ceasefire has drawn scrutiny, with questions surrounding who actually brokered the pause and what the U.S. actually secured.
This supply shock is without precedent. Past geopolitical disruptions, including the Yom Kippur War in 1973, the Iranian Revolution in 1979, the Iran-Iraq War in 1980, and the Persian Gulf War in 1990, each removed only around 4 to 6% of global oil supplies. The current shortfall is three to five times larger and marks the first time the Strait itself has been closed.
New research from the Federal Reserve Bank of Dallas quantified the potential scale of the damage. The model shows that even the anticipation of a supply shortfall of this size can generate an oil price surge and a global economic contraction. If the Strait had shut down for the full second quarter of 2026, average WTI prices would have been expected to reach $98 per barrel, with global real GDP growth dropping by an annualized 2.9 percentage points in that same quarter.
A two-quarter closure would push oil prices to $115 per barrel in the third quarter of 2026, and a three-quarter closure could see prices hit $132 per barrel by year-end. Under that worst-case scenario, the model projects global real GDP growth would remain negative through the end of 2026, with a reduction of 1.3 percentage points in fourth-quarter growth. The effects on U.S. GDP would likely be of a similar magnitude, despite the country’s near-balanced petroleum trade balance since the shale oil boom.
Wall Street also moved on the news late Tuesday. The S&P 500 erased earlier losses to end with a gain of 0.1%, while the Dow Jones Industrial Average slipped 85 points, or 0.2%, and the Nasdaq composite added 0.1%. Treasury yields eased, with the 10-year yield falling to 4.24% from 4.30%. The U.S. dollar slipped against the Japanese yen to 158.54 from 159.52, and the euro gained to $1.1671 from $1.1597.
Analysts cautioned that the ceasefire resolves little on its own. Iran’s claim of victory in the ceasefire terms has directly contradicted the White House’s account, with both sides framing the agreement as a win on their own terms. Tim Waterer, chief market analyst at KCM Trade, noted the ceasefire is only two weeks long and that markets would be watching closely to see whether shipping through the Strait normalizes as promised and whether the truce can pave the way for a more durable agreement.
Several partial workarounds for the oil supply shortfall exist but each carries significant risk. Saudi Arabia could increase flows through its East-West pipeline to Yanbu port, which can redirect around 4 million barrels per day, though that facility is within range of Iranian and Houthi missiles from Yemen. The UAE has a pipeline bypassing the Strait to the port of Fujairah, but both that pipeline and port have already come under Iranian attack. China has reportedly negotiated a deal with Iran to allow its tankers through the Strait, and India has arranged a similar agreement.
The model’s central finding is that even a partial reduction in the supply shortfall could substantially limit the economic damage, but until that happens, the impact on real economic activity is expected to be significant and unevenly distributed across the globe.
Published: Apr 8, 2026 05:30 am