April 8 - U.S. and European energy equities slid on Wednesday following a sudden softening of the war-risk premium built into oil prices after a temporary pause in strikes on Iran. The move came after U.S. President Donald Trump agreed late on Tuesday to a two-week suspension of strikes on Iran, conditioned on the immediate and safe reopening of the Strait of Hormuz.
Oil responded quickly to the development, slipping below $100 per barrel as relief about potential supply interruptions eased. Brent futures retreated to $90.40, their weakest level in nearly a month, reversing from record monthly gains in March that had been driven by supply concerns tied to the regional conflict.
Market commentators cautioned that the initial rally in risk appetite could be fragile. "The initial market reaction has been significant, but sentiment will remain driven by headline risk," said Achilleas Georgolopoulos, senior market analyst at brokerage XM. He added that any sign of the ceasefire being fragile could swiftly undo the day’s improved risk tolerance, with oil prices likely to react first.
Price moves since late February underline the scale of recent market turbulence: Brent and U.S. West Texas Intermediate rose 50.8% and 68.5%, respectively, through to April 7, when heightened Middle East tensions disrupted traffic through the Strait of Hormuz, a key shipping corridor for crude.
Matthew Ryan, head of market strategy at global financial services firm Ebury, said volatility is expected to remain elevated as traders monitor both the ceasefire discussions and maritime activity. "Should talks falter or activity through the strait remain subdued, oil prices and the dollar could reverse course fairly quickly," Ryan said.
Equities react
The easing in oil prices punctured a conflict-driven rally in energy equities that had powered the sector earlier in the year. U.S. majors led the declines with shares of Exxon Mobil and Chevron each falling by more than 6%.
Smaller and mid-sized producers also retraced sharply. Stocks of Occidental Petroleum, Devon Energy, Diamondback Energy and ConocoPhillips dropped in a range between 7.7% and 9%.
Service providers and refiners were broadly weaker, and liquefied natural gas exporters, which had benefited from elevated spot prices amid the conflict, were among the hardest hit. Venture Global plunged about 17% while Cheniere Energy declined about 7%.
The pullback followed a strong first quarter for the energy complex. Surging crude prices had pushed the S&P 500 Energy Index up more than 37%, making it the best-performing sector in the S&P 500 over that span, while the broader S&P 500 fell roughly 4.6% in the same period.
Ashley Kelty, an analyst at Panmure Liberum, said the ceasefire may give markets space to better assess damage from the conflict and to price the time needed to restore disrupted facilities and restart output.
European majors and sector-wide sell-off
European oil and gas companies also suffered notable losses. TotalEnergies, Shell, BP, Eni and Repsol fell between 5.5% and 8%. Norway’s Equinor slumped 13.7%, while Var Energi and Aker BP lost 13.2% and 2%, respectively.
Europe’s oil and gas sector was the weakest performer on the continent, sliding about 3.3% on the day and on track for its largest daily drop since April 2025. Despite the setback, the index remained up about 31% so far in 2026.
Winners amid lower crude
Not all market participants were hurt by the pullback in oil. Airlines, relieved by the prospect of lower fuel costs, rallied strongly. United Airlines, Delta Air Lines and American Airlines each gained over 10%, providing some offset to weeks of pressure from elevated jet fuel prices.
Traders and strategists noted that while the ceasefire reduced immediate supply-risk premia, the outlook remains closely tied to developments in negotiations and shipping activity. If disruption resumes or maritime flows remain limited, the recent price retreat could reverse rapidly, bringing energy markets back under stress.