Oil Prices Collapse Below Pre-War Levels as Ceasefire Eases Global Tensions: What It Means for Energy, Inflation, and Investors

Fragile Peace Between Iran and Israel Sends Oil Sliding and Markets Soaring

Oil prices plunged Tuesday, retreating to pre-war levels after the announcement of a ceasefire between Iran and Israel, a development that eased fears of supply disruption and sparked optimism in global markets.

• Brent crude fell 6.1% to $67.14 per barrel

• West Texas Intermediate (WTI) dropped 6% to $64.37 per barrel

These levels match those seen prior to Israel’s June 13 airstrikes on Iranian nuclear facilities — the event that triggered nearly two weeks of escalating conflict, including U.S. military involvement.

From Escalation to Fragile Truce: The Market Breathes

The truce, announced late Monday by President Donald Trump, was quickly tested when Israel accused Iran of violating the agreement. Iran denied the claims. Despite early doubts, the ceasefire held as of Tuesday afternoon.

Markets responded with a wave of relief:

• Dow Jones: +507 points (+1.19%)

• S&P 500: +1.11%, near record highs

• Nasdaq: +1.43%, just 1.3% from its peak

• VIX (Volatility Index): -12%, signaling reduced risk sentiment

Global equities also rallied:

• Hang Seng (Hong Kong): +2%

• Shanghai Composite: +1.2%

• STOXX Europe 600: +1.11%

Oil Retreats as Middle East Risk Premium Shrinks

Oil prices had spiked during the early stages of the conflict — particularly after U.S. airstrikes — but are now falling as immediate threats to oil infrastructure and supply chains appear to subside.

“The market is signaling this conflict is likely over,” said Robert Yawger, analyst at Mizuho Securities.

Still, some analysts caution that celebrations may be premature. Lukman Otunuga, market strategist at FXTM, warned that renewed conflict or violations of the ceasefire could quickly return risk aversion to global markets.

Strait of Hormuz Stays Open — For Now

One of the biggest fears during the conflict was the potential blockade of the Strait of Hormuz, the narrow waterway through which roughly 25% of global oil passes daily, according to the International Energy Agency (IEA).

A long-term disruption would have sent oil prices soaring. Goldman Sachs estimated that Brent crude could easily top $100 per barrel in that scenario.

But with the truce in place, that risk seems to have diminished.

“The severe economic consequences of a potential blockade likely pushed both sides to seek de-escalation,” said Mukesh Sahdev, global head of commodities at Rystad Energy.

If the ceasefire holds, he expects Brent to stabilize “around $70 per barrel.”

Implications for Inflation, Investors, and the Global Energy Market

The ceasefire — and the resulting drop in oil prices — has far-reaching consequences across sectors:

For Investors:

• The easing of geopolitical risk boosts appetite for equities and risk assets

• Energy stocks and oil ETFs may face pressure as crude retreats

• Sectors like airlines and transportation benefit from falling fuel costs

For Inflation:

• Lower oil prices reduce inflationary pressure globally

• In the U.S., this could influence the Federal Reserve to consider rate cuts, especially if inflation expectations continue to fall

• Countries like India, South Korea, and China stand to gain from cheaper imports

For the Energy Market:

• Lower oil prices make alternative energy sources temporarily less competitive

• Attention turns to the OPEC+ response, as producers may consider cutting output to support prices

• The long-term energy outlook remains sensitive to Middle East stability and U.S.–Iran nuclear negotiations

What to Watch Moving Forward

Key developments in the coming days include:

• Compliance with the ceasefire terms by Iran and Israel

• Security of the Strait of Hormuz

• Any progress toward a new U.S.–Iran nuclear deal

• Possible production cuts or market adjustments by OPEC+

For now, the ceasefire has brought short-term relief to energy markets and investors — but volatility may return quickly if tensions reignite.