Middle East ceasefire, the global human wallet begins to recover

Ask AI · How can falling oil prices ease global supply chain pressures?

The foot that was heading towards the cliff has retreated.

Trump was threatening Iran with “the entire civilization will perish,” and then he announced a two-week ceasefire.

In the blink of an eye, the situation turned around. A series of peace signals were rapidly delivered, with the US, Israel, and Iran agreeing to a temporary ceasefire, Iran announcing a ten-point peace plan, and US-Iran talks scheduled to start on April 10. Iran also promised that — during the ceasefire — the Strait of Hormuz would be safely navigable for two weeks.

The news acted like a powerful stimulant, instantly energizing global capital markets. On April 8, Japanese and South Korean stock markets rebounded sharply, with the Nikkei 225 index surging over 5%, and the KOSPI index in South Korea rising by more than 6% at one point, triggering circuit breakers. The three major Chinese stock indices opened higher collectively: the Shanghai Composite up 1.03%, the Shenzhen Component up 2.36%, and the ChiNext up 3.07%.

This was the long-awaited recovery. In March, the KOSPI index in South Korea fell a total of 19.1%, marking the largest monthly decline since the 2008 financial crisis; the Nikkei 225 plunged 13.23%, the worst performance since early 2020 during the pandemic. South Korea and Japan, heavily dependent on energy imports, became the most direct “victims” of Middle Eastern conflict.

Ruo Zhiheng, Chief Economist and Director of the Research Institute at Yuekai Securities, told Sanlihe that the phased easing of the war situation has, on one hand, boosted market confidence, and on the other hand, the easing of oil supply shocks has lowered inflation expectations, thereby reducing previous monetary tightening expectations, which is generally positive for capital markets and gold. Meanwhile, the market had previously experienced a sharp short-term decline, and as the situation eased, a phase of rebound naturally occurred.

Over the past month, missiles in the Middle East have not only struck the Persian Gulf but have also precisely bombed the wallets of people worldwide. With the Strait of Hormuz blocked, this vital passageway, carrying about one-fifth of the world’s seaborne oil and liquefied natural gas, faced obstruction. Oil prices soared from around $70 per barrel to nearly $120, with Brent crude oil surging over 60% in a single month — the largest increase since 1988. The spike in oil prices directly increased the cost of production and daily life for people worldwide.

The most absurd case was that even plastic bags became scarce. In South Korea, due to a supply interruption of naphtha, a key raw material for plastics, the price of polyethylene — the main raw material for trash bags — skyrocketed. Supermarkets in Seoul, Busan, and other cities posted “trash bag purchase limits.”

Similar scenes played out in many parts of the world. An insignificant plastic bag became a vivid symbol of global supply chain breakdown.

Ruo Zhiheng believes that after the global oil supply shock, downstream industrial and consumer goods relying on oil as energy and raw materials also faced significant price increases. There is also the risk that, under extreme conditions, related industrial chains could halt production or operations, adversely affecting consumers especially in some countries: on one hand, the prices of plastic products and other daily consumer goods rose, increasing living costs; on the other hand, consumers were forced to reduce oil vehicle travel, decreasing convenience in daily life.

The temporary ceasefire and navigation commitments reversed market expectations. Risk aversion rapidly declined, with WTI crude oil futures dropping more than 19% intraday, falling below $100 per barrel. Brent crude futures also fell over 16% at one point.

Ruo Zhiheng said that this easing of the situation increased residents’ property income through rising asset prices, while also lowering the living costs driven up by previous oil price increases.

For people worldwide, this means the “bleeding” in their wallets has begun to stop. But they must remain clear-eyed: this is only a temporary ceasefire. Whether the ceasefire will hold or break midway, and whether the Strait of Hormuz will remain open smoothly, are still uncertain. If negotiations break down and fighting resumes, oil prices will surge again, supply chains will fracture once more, and wallets worldwide will face a new round of “bombardment.”

But even two weeks is precious. Missiles falling destroy buildings, tear apart supply chains, and drain the wallets of people everywhere; peace arriving repairs the markets, warms the economy, and safeguards the daily lives of every family.

Although both the US and Iran claim victory, in reality, prolonged conflict has no winners — peace is the greatest benefit. Over the next two weeks, the whole world will be watching the negotiation table, waiting for truly good news.

“Sanlihe” Studio