Markets breathed easier this week and repriced swiftly as a ceasefire in the Middle East eased oil prices, cooled inflation fears and revived investors’ risk appetite.
Read this article to understand:
- How quickly markets eased on news of the ceasefire
- The impact on government bonds, equities and oil prices
- The importance of looking through the noise for long-term investors
The past week showed how sensitive markets remain to changes in the global backdrop. A small step away from conflict was enough to reshape expectations for inflation, interest rates and risk taking, triggering markets to breathe easier as they moved from the fear of the unknown to an air of cautious optimism.
At the start of the week, there was a clear tension between efforts to find an off-ramp to the conflict and the language being used. While US leadership signalled openness to a temporary ceasefire and renewed talks, this sat alongside very strong, escalatory rhetoric and tight deadlines, leaving markets unconvinced that de-escalation would be smooth or durable. That mixed messaging kept a geopolitical risk premium embedded in energy markets as Brent crude oil traded above $110 a barrel.
Momentum shifted decisively on the night of Tuesday, April 7, with the announcement of a two‑week ceasefire between the US and Iran, alongside plans for further talks. Markets reacted swiftly. Oil prices fell sharply, with Brent dropping by more than 13 per cent in a single day, briefly trading close to $94 a barrel, its lowest level in around a month. That move alone changed the tone of the week. Lower energy prices eased fears that inflation could re‑accelerate just as central banks were hoping to stabilise it.
Government bond yields reacted sharply on the news as investors scaled back the expectations of further interest rate rises that had become a focus for markets over the past month. The yield on ten‑year UK government bonds dropped by around 0.25 percentage points, while European and US government bonds saw similar falls on news of the ceasefire.
Equity markets also saw some of their biggest daily moves on Wednesday on the back of the news. European shares had one of their strongest days since 2022, with the broad-based STOXX Europe 600 rising by almost four per cent, while the German DAX index jumped by more than five per cent in a single session. US markets also advanced strongly. The S&P 500 gained over 2.5 per cent, moving to within roughly three per cent of its all‑time high. Gains were broad across regions and sectors, although energy stocks lagged as falling oil prices weighed on profits.
As the week progressed, markets moved from celebration to consolidation. Oil prices stabilised around $96 to $98 a barrel, well below the highs seen just days earlier. The S&P 500 extended its rally, rising for seven consecutive sessions, its longest winning streak in over a year. Measures of market stress eased back towards normal levels, suggesting investors were growing more comfortable with the outlook.
Attention gradually returned to economic data. Investors are now focused on inflation figures in the US, which will show how much the earlier energy price rises fed through to consumer prices. While headline inflation may rise in the near term, markets appear reassured that the worst‑case scenario has been avoided.
The key message from the week is clear. Markets moved rapidly from pricing fear to cautious optimism. The speed of the rebound highlights how much uncertainty had already been built into prices. It also reinforces an important lesson for long‑term investors: staying invested through periods of uncertainty matters. As evidence of this, global equity markets are up by 2.3 per cent in local terms so far in 2026, despite the volatility seen along the way.1
Past performance is not a reliable indicator of future results.
References
- Source of all the data for this article: Aviva Investors and Bloomberg. Data as of April 10, 2026.
