Iran and the US reached an agreement overnight to a two-week ceasefire brokered by Pakistan, just hours before US President Donald Trump’s deadline for Tehran to reopen the Strait of Hormuz or else a “whole civilization will die.”

The agreement: Washington will “suspend the bombing and attack of Iran for a period of two weeks” if Tehran reopens the Strait of Hormuz, Trump said. Tehran responded by saying it would halt its attacks across the Gulf if the US and Israel stop their attacks. The Islamic Republic also said it would open the Strait of Hormuz, allowing vessels to transit the waterway in coordination with Iranian armed forces.

The ceasefire “does not include Lebanon,” Israeli Prime Minister Benjamin Netanyahu said after the agreement was announced. That statement comes as Israel expands its evacuation orders in Lebanon, issuing directives for about 40 villages in the south to evacuate earlier on Catholic Easter Monday, including in Christian-majority areas that were largely spared from earlier displacement directives.

What happens next? The two sides will meet on Friday to “further negotiate for a conclusive agreement to settle all disputes,” Pakistan’s Prime Minister Shehbaz Sharif said. Trump said Iran presented a 10-point proposal, which he called a “workable basis on which to negotiate.”

The question is whether the ceasefire will hold: An hour after the ceasefire announcement, the UAE’s Defense Ministry warned that sounds heard this morning are the result of interceptions of missiles and unmanned aerial vehicles. Qatar and Kuwait also reported a fresh round of missile attacks, while Saudi Arabia issued a security alert to residents.

Market reax: Oil dipped below USD 100 / bbl following the news, with Brent dropping as much as 16% to below USD 92 earlier today.

Indian stock markets cheer

BSE Sensex and Nifty 50 — India’s benchmark indices — rallied following the ceasefire announcement. Sensex jumped 3.8% while Nifty surged 3.6% after recording losses for six consecutive weeks. The surge was more pronounced in the stocks of companies with significant exposure to the MENA region, including InterGlobe Aviation (+10%), parent company of India’s largest domestic carrier IndiGo; construction major Larsen & Toubro (+7.9%), which earns 40% of its revenue from the region; and Adani Ports (+5%), a major stakeholder in Israel’s Haifa port.

Macro pressure will ease if ceasefire holds

Opening the Strait of Hormuz and a decline in crude oil prices would ease macroeconomic pressures on India. While eight India-flagged vessels crossed the strait following intense high-level diplomatic talks between Tehran and New Delhi, the arrangement was barely sustainable for the country. Some 90% of India’s LPG imports pass through the strait, and the blockade prompted the government to cut supplies to industrial consumers to prioritize domestic users.

Meanwhile, a USD 10 / bbl rise in crude prices adds up to USD 18 bn to India’s import bill, widening the current account deficit and boosting inflation by 60 bps. Many ratings agencies had already trimmed India’s growth forecast for the current fiscal year while highlighting knock-on effects on the industrial output. A sustained ceasefire, declining crude prices, and uninterrupted access to Gulf trade via Hormuz are likely to ease the macroeconomic stress.

^^Want to read more? We previously covered how the war has impacted India’s economy and industry (here, here, and here).

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