Euphoria and uncertainty reinforce the impact of the oil shock on the global economy.

Oil prices plummeted and stocks soared worldwide on Wednesday, April 8, driven by the immediate relief brought by the ceasefire between the United States and Iran , announced the previous day, and by the partial reopening of the Strait of Hormuz in the Persian Gulf, which had disrupted 10% or more of the world's oil supply in recent weeks.

The market euphoria, however, contrasts with the certainty that the effects of the war on the global economy are still far from being resolved. The resumption of production and transport of oil tankers, for example, should take weeks or months.

Furthermore, the fact that the agreement is limited to a 15-day ceasefire between adversaries who have never adopted a conciliatory tone since the beginning of the conflict reinforces the degree of uncertainty in the geopolitical scenario in the short term.

The relief in the markets, in practice, confirmed the damage caused by the war – which began six weeks ago, with effects on the infrastructure of the Persian Gulf region, a major global oil producer.

The Brent crude oil index opened the day trading between US$92.40 and US$95.36 per barrel, a drop of between 13% and 15% compared to the previous day. The US WTI index followed suit, trading between US$94.98 and US$96.82 per barrel, a decline of between 14% and 16% compared to the previous day. Both contracts had surpassed US$110 during the peak of tensions, but are now undergoing a sharp correction with the easing of geopolitical tensions.

Across financial markets worldwide, optimism was similar. US futures markets saw gains in the Dow Jones (+2.8%), S&P 500 (+2.9%), and Nasdaq 100 (+3.5%), reflecting the reduced immediate risk of prolonged disruption in the Strait of Hormuz, boosting technology stocks and sectors sensitive to energy costs.

Asian stocks, where countries import large quantities of oil and gas, also posted significant gains. Japan's Nikkei 225 index rose 5.4%, while South Korea's Kospi index climbed nearly 7%. Markets in Taiwan, Hong Kong, and mainland China also showed significant increases. In Europe, the Stoxx 600, a broad European index, rose 3.5% by midday.

At the same time, the global stock rally following the ceasefire announcement is not only due to geopolitical relief, but also to a potential short squeeze – as the sharp upward movement in the prices of a stock or index is called, which forces investors who were short (betting on a fall) to quickly buy back these assets to limit losses, and this rush to buy back pushes prices even higher.

Hedge funds had been aggressively expanding short positions in recent weeks—in March, they sold short at a ratio of 7.6 to 1, according to data from Goldman Sachs' brokerage unit. With the surge in stock markets, these bets against the market began to generate losses and may be being unwound, further fueling the rally.

Defensive strategies based on selling ETFs and futures, used to protect portfolios during the war, now become an additional risk for those who remain short, increasing the likelihood of sharp repurchase movements, especially in Europe.

Suspended threats

In the ceasefire agreement announced by President Trump on Tuesday night, Iran agreed to allow ships to pass through the strait without being attacked. Earlier that day, Trump had declared that if the waterway remained closed, "an entire civilization will die tonight, never to be recovered."

Trump has also repeatedly threatened to attack Iranian power plants and other critical infrastructure if Iran does not allow ships to pass through the strait—acts that could be considered war crimes.

Experts warn, however, that the return of oil flows through the Persian Gulf will be slow, as will the recovery of the global economy.

Gasoline prices in the U.S., for example, rose again on Wednesday, the 8th, reaching a national average of $4.16 per gallon, according to the AAA auto association. The increase has raised the cost for drivers by 40% since the start of the war. Diesel prices rose even faster, reaching $5.67 on Wednesday, a 51% increase in six weeks.

Analysts emphasize that the resumption of oil transport through the Strait of Hormuz depends not only on security in the waterway, but also on the inspection of equipment, replacement of critical parts, and reorganization of teams and vessels dispersed during the conflict.

“It’s not like you just push a button and everything starts working again,” said Martin Houston, a veteran oil and gas executive who now serves on the board of directors of several energy companies.

Even with the expectation that some wells will resume operations within days or weeks, experts say that complete normalization will take months — and, in cases of severe damage, years.

Strategic facilities, such as the Ras Laffan liquefied natural gas plant in Qatar, have had part of their capacity destroyed and will require lengthy reconstruction periods due to technical complexity and a global shortage of specialized components.

Refineries in Kuwait, Saudi Arabia, and Iran are also operating at reduced capacity, while supply chains strained by demand from energy infrastructure and data centers make it difficult to quickly replace turbines and cooling systems.

Before the start of the conflict between the US and Iran, an average of 138 vessels transited the Strait daily. Since the start of the operation, that number has fallen by more than 90%, with daily crossings frequently dropping to single digits.

"For the markets, the flow of oil through the Strait matters more than the oil stockpile, that is, the energy infrastructure to produce it, because the flow keeps the global economy moving, given that the oil market before the conflict was close to excess inventory, with oversupply," stated Ben Emons, founder of FedWatch Advisors.

"In this sense, the reopening of the Strait functions similarly to the reopening during the pandemic and has characteristics already priced into the financial markets, such as being a form of quantitative easing, which was inherently more about flow than about stock," he adds.

This relief, therefore, should prevail until confirmation of the resumption of shipping through the Strait of Hormuz – or it could turn into a new focus of crisis for the global economy if Iran resumes blocking the waterway or if Trump decides to resume threats against the Iranian regime.