Oil prices are tumbling and currency markets are snapping back toward pre-war levels after President Donald Trump said that Washington and Tehran had held “very good and productive conversations” over the preceding two days, and that he had ordered the Pentagon to postpone planned strikes on Iranian power plants and energy infrastructure for five days. The announcement, which came just hours before his own 48-hour ultimatum to Iran was set to expire, has led to a circa-15-percent drop in the global Brent crude benchmark, with similar moves playing out in West Texas Intermediate, along with European gas futures.

Since US and Israeli strikes began on February 28, Brent crude has surged more than 50 percent to levels not seen since mid-2022, the Strait of Hormuz has been effectively closed to commercial tanker traffic, and the International Energy Agency has warned that the world faces the largest supply disruption in the history of the global oil market. In foreign exchange markets, the dollar has strengthened against all of its major counterparts amid a flight-to-safety, while currencies belonging to major energy importers—the yen, British pound, and euro—have sold off. The Canadian dollar, caught between soaring commodity prices and collapsing risk sentiment, has whipsawed within a narrow range. Monetary policy expectations have shifted even more violently, with most central banks now seen raising rates by year-end.

Many of these market trends are set to reverse as investors position for an eventual resolution of the conflict—but there are reasons to move cautiously. Trump has sent contradictory signals throughout the conflict, declaring the war “very complete, pretty much” one moment and ordering fresh strikes the next, rejecting a ceasefire on Friday and claiming productive dialogue this morning. The five-day pause is explicitly conditional, Iran has made no public confirmation that talks are under way, and Israeli strikes on Tehran continue even as Trump’s post circulates. Combat operations could intensify again without warning.

For investors and central bankers already navigating the inflationary fallout, the calculus remains bleak: even a swift end to hostilities will leave behind a serious supply-chain shock, elevated inflation expectations, and diminished policy flexibility that will take quarters, not weeks, to unwind. And for currency market participants, questions over the leadership and stability of the world’s most powerful economy will persist long after the dust settles.