The price of benchmark Brent crude fell by about 13% to $94.80 (£70.73) a barrel, while US-traded oil was more than 15% lower at $95.75.
But oil prices remain higher than before the conflict started on 28 February. At the time, it was trading at around $70 a barrel.
The cost of energy has jumped as oil and gas supplies from the Middle East have been severely disrupted after Iran threatened to attack ships trying to use the strait in retaliation to US and Israeli airstrikes.
Stock markets in Europe opened higher following sharp rises in Asia. London’s FTSE 100 share index jumped by 2.53% in opening trade. In France, the Cac gained 4% while Germany’s Dazx rose by nearly 5%.
Japan’s Nikkei 225 gained 5% while South Korea’s Kospi jumped nearly 6%. Hong Kong’s Hang Seng was up 2.8%, while the ASX 200 in Australiagained 2.7%.
US stock market futures also pointed to a higher open for Wall Street.
Futures contracts are an agreement to buy an asset for a set price at a later point in time. In the case of US stock futures, they can indicate the direction of the market before it opens.
In a social media post on Tuesday evening, Trump said: “I agree to suspend the bombing and attack of Iran for a period of two weeks… subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz
He had set a deadline for 20:00 EDT on Tuesday (00:00 GMT on Wednesday), threatening that “a whole civilisation will die tonight” if no deal was reached.
Iranian Foreign Minister Abbas Araghchi said on social media that Tehran will agree to a ceasefire “if attacks against Iran are halted”, adding that safe passage through the Strait of Hormuz “will be possible”.
Iran ceasefire deal a partial win for Trump – but it comes at a high cost
Tracking recent US-Israeli strikes on Iranian infrastructure
Despite his threats, Trump was likely to be wary about letting energy prices “skyrocket” by escalating the conflict, said Xavier Smith from market research firm AlphaSense.
That could have led to a “self-inflicted economic wound” that few would risk, especially given the looming pressure of approval ratings on Trump’s leadership, said Smith, a research director.
More oil tankers stranded near the strait may be able to pass through the waterway during the ceasefire, providing some relief for markets in the coming weeks, said analyst Saul Kavonic from financial services firm MST Marquee.
Despite the conflict, some ships have passed through the Strait of Hormuz, although far fewer than usual.
Asian countries – including India, Malaysia and the Philippines – have negotiated safe passage for their vessels in recent weeks.
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