US-Iran De Facto Ceasefire Sparks Market Rally: What is the Impact of the 5% Plunge in Oil Prices?

As the United States and Iran halt their 13-day military confrontation and enter a de facto ceasefire, geopolitical risks in the Middle East have significantly eased. Consequently, global stock markets have staged a relief rally, and Brent crude, which had been fueling inflation fears, plunged over 5% to the low $90s per barrel.

Middle East Risk Reduction and Plunging Oil Prices

Brent Crude Nears Breakdown of the $90 Mark

With both nations attempting diplomatic dialogue through mediators like Oman, concerns over crude oil supply disruptions are rapidly subsiding. Brent crude, which spooked energy markets by surpassing $100 a barrel last week, quickly fell back to the $91 level, while West Texas Intermediate (WTI) also dropped to the $83 range. This alleviates concerns about a resurgence of inflation driven by rising energy costs, serving as a positive catalyst for the market.

Global Market Relief Rally and Recovery of Investor Sentiment

Revival of Risk-On Appetite

As geopolitical tensions ease, global stock markets, including major US stock index futures, are showing a clear rebound. Foreign capital, which had maintained a wait-and-see approach, is flowing back into the KOSPI market, securing downside support for domestic stocks. The VIX index, which gauges market fear, has also plummeted, indicating a rapid recovery in sentiment for risk assets. Virtual assets like Bitcoin have also benefited from the resolution of Middle East risks, recovering the $65,000 level.

Core FAQ for Investors

• Q1. Will this ceasefire lead to a long-term downward trend in oil prices?
  A1. The current plunge is largely a short-term retracement resulting from the alleviation of extreme fears of a wider war. Since it is a temporary halt in fighting rather than a formal agreement, oil price volatility may persist for the time being due to the potential for conflicts involving neighboring groups like the Houthi rebels in Yemen.
• Q2. What is the biggest impact on the stock market for the second half of the year?
  A2. If global inflationary pressures decrease due to falling oil prices, uncertainty regarding the US Federal Reserve's (Fed) path to interest rate cuts will diminish. This can be a strong factor supporting a rally centered on technology and growth stocks.
• Q3. Which sectors should we pay attention to at this point?
  A3. As expectations for rate cuts may resurface, it is worth noting the rebound potential of large-cap tech and growth sectors, such as semiconductors and AI, which have recently undergone a correction.