Global markets surged while oil prices tumbled on Wednesday after the United States and Iran agreed to a temporary ceasefire, raising hopes for the reopening of the Strait of Hormuz, a key global oil route.

Oil prices dropped sharply, with major benchmarks falling around 15 percent to about $95 per barrel after more than a month of conflict that rattled financial markets and drove up energy costs.

“A wave of relief has hit financial markets after threats of a devastating escalation of the war were replaced by a temporary truce,” said Susannah Streeter, chief investment strategist at Wealth Club.

Investor optimism lifted equities worldwide. Wall Street’s three main indexes rose more than 2 percent, while major European markets closed higher, with Frankfurt jumping over 5 percent and London gaining 2.5 percent.

Asian markets also rallied earlier in the day, with Tokyo surging 5.4 percent and Chinese indexes climbing around 3 percent.

The US dollar, typically seen as a safe-haven asset, weakened against major currencies such as the euro, yen, and British pound as investors shifted back to riskier assets.

Despite the upbeat reaction, analysts warned that the rally could be short-lived.

“In reality, the markets are not pricing in peace but a window for negotiation,” said John Plassard of Cite Gestion.

“And that is precisely the issue: In two weeks, either this window will lead to a lasting agreement, or it will only postpone and amplify the energy shock that everyone fears,” he added.

Concerns persisted after fresh tensions emerged in the region, with Israel launching heavy bombardments in Lebanon, highlighting the fragility of the ceasefire.

Angelo Kourkafas, investment strategist at Edward Jones, described the market reaction as “a big relief rally” but cautioned that volatility is likely to continue.

“Every development in this war has been pretty much unpredictable… we remain in a headline-driven market,” he said.

Oil prices remain elevated and equity markets subdued compared to levels before the conflict escalated in late February.

“I don’t think we’re going to quickly go back to the levels we were at before the war,” said Kathleen Brooks, research director at XTB traders, citing damage to energy infrastructure.

Shipping and energy sectors remain under pressure. While some vessels have begun passing through the Strait of Hormuz, major operators said it was still too early to resume normal operations, with hundreds of ships reportedly stranded in the Gulf.

The International Air Transport Association said jet fuel supplies and prices could take months to stabilize.

“Should talks falter or activity through the strait remain subdued, oil prices and the dollar could reverse course fairly quickly,” said Matthew Ryan, head of market strategy at Ebury.

Shares of oil producers fell sharply, while airline stocks were among the biggest gainers amid easing fuel price expectations.