Oil prices plunge: Iran's state media announces ceasefire

1. Market review: Why did oil prices suddenly plummet?

According to Reuters and market monitoring, international oil prices continued to fall after former US President Trump announced a ceasefire agreement between Israel and Iran. On Monday, WTI and Brent crude oil prices plunged by more than 3% and hovered in the range of $66-69 per barrel. 

Previously, oil prices had climbed due to the conflict in the Middle East, reaching more than $80 per barrel, but as information on the ceasefire came out, market concerns about supply disruptions eased and the risk premium quickly fell back.

2. External factors superimposed: the market's "risk appetite" increased across the board

• Dollar falls : As geopolitical risks decline, the dollar index declines, spurring investors to turn to risky assets and the overall financial market rebounds 

• Asian stock markets rose : For example, the Indian stock market responded positively, and the market expected that the decline in oil prices would ease inflationary pressure and boost stock market confidence.

In addition, before Trump announced the ceasefire, the impact of Iran's missile launches at the US military base in Qatar had been resolved by interception and controllable response on the market side, which also put a certain downward pressure on oil prices.

3. Analysts’ views: Why did oil prices fall sharply?

1. Risk premium cleared.
   Before the oil price contained a large amount of "war premium", this part of the valuation was quickly wiped out after the ceasefire signal was delivered.

2. The supply channels were not substantially affected.
   Iran's actions did not affect the Strait of Hormuz or major oil fields, and the elimination of the threat of blocking the road stabilized the market.

3. Macro signals boost market expectations.
   The Fed's potential interest rate cut expectations, combined with the weakness of the US dollar, also make inflationary pressure controllable, further supporting economic asset allocation.

IV. Impact and Outlook

• Good news for consuming countries : Countries that rely on crude oil imports (such as India) will ease fuel costs, trade deficits and inflationary pressures.

• Energy markets expect increased volatility : if the ceasefire is unsustainable, future risk premiums may be quickly replenished.

• The focus turns to the implementation of subsequent agreements : if interruption control and third-party supervision can be further confirmed, oil prices may stabilize in the low to medium range.

🔎 Conclusion

The ceasefire announcement by Iran's state media became a turning point in market sentiment, causing oil prices to fall rapidly. This reflects the market's high sensitivity to geopolitical risks, but also shows that the supply chain remains stable. In the future, oil prices will continue to fluctuate around whether the ceasefire can last, navigation in the Strait of Hormuz, and security factors.