Oil prices drop after ceasefire announced between Iran and the United States.

The price of oil has dropped, while futures contracts on American stocks have surged after President Donald Trump backed down from his threat to launch devastating attacks on Iran. American crude oil futures have plummeted by more than 15%.

Futures contracts on the S&P 500 index were up 2.2% at 8:05 p.m. (EDT), while those on the Dow Jones were up 930 points, or 2%.

Mr. Trump stated that Iran had proposed a 10-point peace plan that could help end the war initiated by the United States and Israel on February 28.

Iran’s Foreign Minister announced Wednesday morning that ships would be allowed to pass through the Strait of Hormuz, the narrow mouth of the Persian Gulf, in the next two weeks under the coordination of the Iranian military.

It was not entirely clear whether this meant that Iran would ease its grip on this crucial waterway for global energy supply.

Abbas Araghchi wrote in a statement, “For two weeks, safe passage through the Strait of Hormuz will be possible thanks to coordination with the Iranian armed forces and taking technical constraints into account.”

American crude oil futures have dropped by 14.7% to $96.27 per barrel, while the international benchmark Brent crude has fallen by 14.4% to $93.48. The prices are still higher than at the beginning of the war.

As Asian markets opened, the Japanese Nikkei rose by over 4% and the South Korean Kospi gained 6%.

Earlier, American stocks experienced significant fluctuation during regular trading as uncertainty about the war with Iran increased after Donald Trump’s ultimatum at 8 p.m. Washington time to reopen the Strait of Hormuz.

The S&P 500 fell by 1.2%, but stocks rebounded later in the session after the Pakistani Prime Minister urged Trump to extend the deadline by an additional two weeks and asked Iran to open the strait for the long term.

The S&P 500 wiped out all its losses and ended with a slight gain of 0.1%. The Dow Jones Industrial Average fell by 85 points, or 0.2%, and the NASDAQ Composite gained 0.1%.

This marks the latest fluctuations that have rocked financial markets since late February due to deep uncertainty about the end of the fighting.

Oil prices have also been volatile. The price of American crude oil for delivery in May briefly exceeded $117 before settling at $112.95.

Markets fear that long-term disruption will keep oil prices high and cause a devastating wave of inflation that will hit the global economy.

The average price of regular gasoline per gallon in the United States has jumped to $4.14, according to AAA. It was below $3 a few days before the United States and Israel launched attacks to trigger the war in late February.

On the bond market, Treasury bond yields fell upon the announcement of a possible ceasefire. The yield on 10-year Treasury bonds dropped to 4.24% from 4.30% the previous Tuesday.

However, this level is still higher than the 3.97% before the war, and the increase has led to higher mortgage rates and other loans to households and businesses, slowing down the economy.

-With information from the Associated Press.