Ceasefire Shockwave: Markets Unwind War Premium as Crude Collapses and Equities Surge

The announcement of a two-week ceasefire between the US and Iran late Tuesday evening sent a massive shockwave through virtually every commodity market on Wednesday morning. Crude oil collapsed more than 16% to close around $95 per barrel, its worst single-day performance since 2020 and still more than 40% above its pre-war level of $65 in late February. The plunge in crude dragged soybean oil and diesel futures lower as the war premium that had been baked into energy and ag markets since late February was aggressively unwound. Wheat was the hardest hit of the grain complex as both the energy support and the geopolitical risk premium evaporated simultaneously, compounded by welcome rain forecasts arriving for the drought-stressed southern Plains. The equity markets surged with the Dow rocketing more than 1,200 points higher on the relief trade as the world stepped back from the brink of what could have been a catastrophic escalation.

News and Notes:

• Weather forecasts remain non-threatening for US planting and South American harvest. World weather is not an issue the markets are concerned about right now.
• The daily December corn futures chart on page 2 shows today’s 5^th consecutive close under the 20-DMA (red line) and the close above the 50-DMA (green line) despite trading lower than it during the session.
• The ceasefire is real but fragile. President Trump announced the two-week pause just before his 8 p.m. ET Tuesday deadline, contingent on Iran's complete and immediate reopening of the Strait of Hormuz. Iran's foreign minister confirmed safe passage would be allowed in coordination with their armed forces, but within hours Iran's semi-official news agency reported traffic was halted again as Israel continued its assault on Lebanon. Trump countered by warning he would tariff any country supplying weapons to Iran at 50%. This is not a resolved conflict, it is a ceasefire with an asterisk on every clause and two weeks to try to work out an agreement that has major sticking points on both sides.
• Wheat bore the biggest price hit today and perhaps justifiably so given it had the most war premium embedded in it. Coinciding with the ceasefire, forecasts are showing meaningful rainfall arriving for the drought-stricken southern Plains and eastern wheat belt in the next 10 days, the same areas that drove this week's winter wheat condition report showing 35% rated good-to-excellent, the lowest since 2023. If the rain comes and the ceasefire holds, the wheat market is facing a steep road to finding its new price floor.
• The WASDE report tomorrow morning will be the first data point of substance in a new post-ceasefire world. Pre-report expectations call for minimal changes to the US balance sheet.

Today's price action is a reminder of how quickly the script can change in this market environment. Six weeks of war premium built into energy prices has begun to unwind in a single session, and the grain markets that had been partially insulated from their bearish fundamentals by that energy bid are now much more exposed. Corn is still supported by a record export pace running 36% ahead of last year and domestic ethanol demand that is not going away. Beans remain pressured by a record Brazilian crop and zero new-crop Chinese purchases. Wheat has the most interesting story; the crop condition collapse to 35% G/E is real and the market will need to weigh that against improving rain prospects and changes in geopolitical premium. The next 48 hours with the WASDE, likely a non-mover, ongoing Hormuz traffic developments and any new ceasefire headlines will be the most important stretch of trading in several months. With prices lower today, be cautious about chasing sales into weakness, let the WASDE reaction settle and use any ceasefire-news-driven bounces as the better opportunity to advance sales.