Ceasefire relief: Nasdaq 100, S&P 500, Dow and Russell 2000 key levels to watch      

Ceasefire relief: US-Iran truce sparks market rally but recovery remains incomplete

​A fragile ceasefire between the US and Iran has triggered a broad relief rally across global markets, yet after six weeks of conflict, the road to a full recovery remains far from clear. The agreement was reached at the eleventh hour, with Pakistan helping to broker talks just before President Trump's deadline expired.

Fragile truce pauses hostilities

​Under the preliminary arrangement, the US has suspended its bombing campaign for two weeks, on the condition that Iran reopens the Strait of Hormuz - the route through which roughly a fifth of global oil supply moves. Tehran quickly indicated it would comply, saying safe passage could resume under the supervision of Iranian armed forces but so far only a handful of vessels have passed through the strait.

​It is clear that the current agreement falls well short of a full peace settlement. Iran's proposed framework - said to include a US military withdrawal from the region, sanctions relief and continued Iranian oversight of the strait - remains materially at odds with Washington's position.

​Formal negotiations are due to begin in Islamabad, but mixed signals from the region and ongoing security alerts underline how precarious the situation remains. The next fortnight will be crucial in determining whether this truce develops into something more durable or merely postpones another escalation.

Six weeks of disruption — oil price impact

​Since late February, the conflict has left a deep mark on financial markets and generated substantial volatility. Energy markets absorbed the biggest shock, with WTI crude surging almost 70% and European natural gas climbing more than 60% as supply routes were disrupted.

​Even after Wednesday's over 10% drop in crude prices, oil continues to trade at historically elevated levels, with Brent rising back to above $95 per barrel and WTI to above $97.

​How to trade oil remains challenging during such volatility. 

Technical analysis of Brent crude

​Brent crude oil has resumed its ascent from Wednesday’s $88.79 low with the 1 April low at $97.08 creating a possible upside target and resistance level ahead of the psychological $100 mark.

​Brent crude oil daily candlestick chart

Were a fall through Wednesday's $88.79 low to be seen, though, it may reopen the path towards the $85 to $84 area. 

​Even though in the very short term further upside may be seen, the medium-term outlook is now toppish while Brent remains below the 16 March high at $103.14, and long-term conditions remain toppish while it stays below the 31 March peak at $108.88.

​War impact on stock markets and currencies

​Equity markets fell broadly during the conflict, with Asia bearing much of the pressure because of its reliance on imported energy. South Korea's KOSPI at one stage suffered a near-20% drawdown, while US equity markets proved relatively more resilient.

​Currency and bond markets also reflected the shift in sentiment. The US dollar and Swiss franc strengthened on safe-haven demand, while several Asian currencies fell to record lows.

​At the same time, government bond yields moved higher as investors priced in more persistent inflation arising from elevated energy costs. Rising real interest rates then helped drive a sharp correction in precious metals.

​Gold and silver both fell heavily despite the geopolitical backdrop. 

Relief rally underway but incomplete

​Markets reacted quickly to the ceasefire announcement, revealing a strong degree of pent-up demand for risk assets. Asian equities led the move higher, with Japan's Nikkei rebounding by around 5%, while US futures and European markets especially also posted strong gains.

​Oil fell sharply as the immediate supply-shock premium started to unwind, and broader risk appetite improved. Even so, the rebound remains incomplete, with many markets recovering only about half the losses sustained since the conflict began.

​Not all assets have participated equally. Silver, for instance, has lagged the wider recovery, reflecting the unwinding of leveraged positions that had built up during its earlier rally.

What comes next for markets

​In the near term, the strongest rebounds are likely to come from the assets and sectors that were hit hardest during the sell-off creating mean reversion.

​Technology and materials - both highly sensitive to growth expectations and interest-rate shifts - may continue to outperform if risk appetite improves further since these sectors suffered disproportionately.

​By contrast, energy markets may surrender part of their earlier gains as the immediate geopolitical premium fades, although prices are still likely to remain elevated above pre-conflict levels.

​That said, several factors are likely to cap the extent of any recovery. The ceasefire is temporary, negotiations are uncertain, Iranian missile and drone attacks on its neighbours continue, the movement of thousands of marines and ground forces to the Middle East continues and physical supply disruptions will not disappear overnight.

Supply normalisation takes time

​Even if the Strait of Hormuz fully reopens, shipping backlogs and logistical bottlenecks mean a return to normal conditions may take weeks or even months. Damage to major infrastructure, including LNG export facilities, will also weigh on supply for a prolonged period and should help keep a floor under energy prices.

Central banks face continued challenges

​For central banks, the ceasefire offers some immediate breathing room, but it does not resolve the deeper conflict between inflation and growth creating policy dilemmas.

​High energy prices still pose upside risks to inflation, while the wider economic fallout - especially for energy-importing regions - may weaken growth with stagflation risks persisting.

​Expectations for aggressive rate hikes may cool somewhat, but policymakers are likely to remain cautious. The US Federal Reserve is not expected to cut rates until 2027, while the Bank of England and other central banks continue to navigate a difficult balance.

​Oil-driven inflation has already fed into broader price pressures, and the combined effects of disrupted trade, lost output and higher input costs are likely to complicate monetary policy even in a ceasefire environment.

​Market outlook remains cautious

​For now, markets appear to be moving into a phase of tentative recovery rather than a full reset reflecting fragile optimism.

​The next fourteen days will matter enormously. If negotiations make progress, the relief rally may have further to run. If tensions flare up again, recent gains could quickly unwind.

​At present, investors are likely to treat the rebound as a reprieve rather than a resolution with volatility expected to remain elevated. 

​Key technical levels to watch for the Nasdaq 100, S&P 500, Dow and Russell 2000

​US stock indices rallied strongly into their respective resistance zones and reached their 61.8% Fibonacci retracement levels of their recent descent. In doing so they left wide gaps open, all of which are expected to be at least partially filled as long as the resistance areas cap the upside.

​Having said that, all four US stock indices are considered to be long-term bullish while they remain above their late March lows. While these underpin, new record highs may well be made in the course of this year.

​In case of the Nasdaq 100 the top of its resistance zone comes in at the 11 February 25,382 high. While this level isn’t overcome, this week’s price gap between 24,757-to-24,265 is expected to at least partially get filled.

​Nasdaq 100 daily candlestick chart

​The technical situation looks similar for the S&P 500 where its 6,740-to-6,618 is expected to at least partially get filled while no rise and daily chart close above the 10 March high at 6,845 is seen.

​S&P 500 daily candlestick chart

​When it comes to the Dow Jones Industrial Average it ‘only’ shot up as far as slightly above its 50% retracement of the February-to-April decline at 47,788.

​Dow Jones Industrial Average daily candlestick chart

​The Dow’s resistance area goes up to the mid-November high and the 20 January low at 48,428-to-48,431. While it caps on a daily chart closing basis, a retracement towards the 10 December low at 47,463 and the 2 December low at 47,597 may ensue.

​Closure of the 46,978-to-46,744 price gap may not happen, though, depending on the ongoing situation in the Middle East.

​When it comes to US small caps, the Russell 2000 saw a strong rally take it close to the upper edge of its resistance area at the 4 March 2,644 high. While it caps on a daily chart closing basis, part of this week’s 2,596-to-2,548 price gap may get filled. 

​Russell 2000 daily candlestick chart 

​Support can be spotted between the 50% retracement of the January-to-March decline and the early February low at 2,571-to-2,569.

​A rise above the early March high at 2,644 would likely lead to the 2,700 region being revisited.

How to navigate market recovery

​Investors and traders managing positions during tentative recovery have several options. Here's how to approach current environment:

​Research ceasefire terms, negotiation prospects and market dynamics thoroughly. Understanding geopolitical situation helps inform decisions. Trading for beginners provides background.

​Choose whether you want to trade recovery or maintain cautious positioning. Spread betting and CFD trading allow flexibility.

​Open an account with broker offering diverse instruments across commodities, equities and currencies.

​Review positions on your chosen trading platform. Consider whether to add exposure or maintain hedges.

​Implement strategy based on analysis and risk tolerance. Maintain stop-loss discipline given fragile ceasefire that could collapse.

​Remember ceasefires can fail rapidly. Only increase positions sized appropriately for potential reversals, maintaining diversification and risk management given substantial remaining uncertainty during fragile peace negotiations and temporary truce arrangements.​​