Oil Prices Drop Back to Pre-Iran-Israel Conflict Levels as Ceasefire Eases Supply Concerns

Oil prices plummeted on Tuesday, returning to levels not seen since before the Iran-Israel conflict, as investors cheered the news of a fragile ceasefire between the two countries. Brent crude, the global oil benchmark, fell 6.1% to $67.14 a barrel, while West Texas Intermediate crude, the US oil benchmark, dropped 6% to $64.37 a barrel. These levels are broadly comparable to the closing prices in the days before Israel launched an unprecedented attack on Iranian nuclear facilities on June 13.

The ceasefire, announced by President Donald Trump late on Monday, came after a 12-day conflict that saw both sides launch a barrage of missiles into each other's territory, as well as direct military involvement by Israel's biggest ally, the United States. However, hours after the announcement, Israel accused Iran of violating the terms of the ceasefire, which Iran denied. Trump expressed intense anger on Tuesday morning as the ceasefire appeared to be on shaky grounds.

Despite the uncertainty surrounding the ceasefire, US stocks closed in the green. The Dow Jones Industrial Average closed higher by 507 points, or 1.19%, while the S&P 500 gained 1.11% and the tech-heavy Nasdaq Composite rose 1.43%. The S&P 500 was less than 1% away from an all-time high, and the Nasdaq was just 1.3% away from its own record high.

The CBOE Volatility Index, often referred to as Wall Street's fear gauge, was down 12%, signaling relative calm in markets. In Asia, stock indexes also closed higher, with Hong Kong's Hang Seng finishing up 2% and mainland China's Shanghai Composite up 1.2% on the day. In Europe, the benchmark STOXX Europe 600 index, which includes UK-listed companies, closed higher by 1.11%.

"There could be hiccups along the way, but the market is saying this (conflict) is likely over," said Robert Yawger, a commodities specialist at Mizuho Securities. "Markets breathed a sigh of relief following Trump's ceasefire declaration, but the celebration could be short-lived," said Lukman Otunuga, senior market analyst at FXTM. "If tensions flare again or the ceasefire is violated, we could see a swift return to risk aversion - boosting safe havens like gold and pressuring global equities."

The ceasefire has eased concerns about disruptions to global oil supplies. Many investors had been worried that Iran could close the Strait of Hormuz, a critical waterway that ferries around a quarter of the world's oil supply, according to figures from the International Energy Agency. That scenario - which would likely send oil prices skyward - now appears less of a threat.

Assuming the ceasefire holds, Brent crude could hover "near the $70 per barrel level while clarity on a US-Iran deal emerges," said Mukesh Sahdev, global head of commodity markets at Rystad Energy. "The prospect of severe economic fallout from a potential blockade (of the strait) likely motivated both sides to agree to the ceasefire if it is indeed genuine," he wrote in a note.

While oil prices had soared after the Iran-Israel conflict began, touching a five-month high last week, they tanked on Monday after Iran launched targeted and limited missile strikes on US bases in Qatar. US crude tumbled 7.2% to settle at $68.51 a barrel, its biggest one-day drop since early April and one of its worst days over the past three years. Brent closed at $71.48 a barrel, down 7.2%, its steepest decline since August 2022.

In related news, CNN's Matt Egan contributed to this report. For more CNN news and newsletters, create an account at CNN.com.