The S&P/ASX 200 Index (ASX: XJO) opened strongly and is up 1.13%, while energy shares are plunging 4.41% on Tuesday.
Major oil and gas producers Woodside Energy Group Ltd (ASX: WDS) and Karoon Energy Ltd (ASX: KAR) are the biggest casualties so far.
The tumble in ASX 200 energy shares follows news that Iran and Israel have agreed to a ceasefire and a staggered end to the '12-day war'.
US President announces Iran-Israel deal
President Donald Trump announced the ceasefire deal on Truth Social at about 8am AEST.
President Trump said:
It has been fully agreed by and between Israel and Iran that there will be a Complete and Total CEASEFIRE (in approximately 6 hours from now, when Israel and Iran have wound down and completed their in progress, final missions!), for 12 hours, at which point the War will be considered, ENDED!
Officially, Iran will start the CEASEFIRE and, upon the 12th Hour, Israel will start the CEASEFIRE and, upon the 24th Hour, an Official END to THE 12 DAY WAR will be saluted by the World.
Overnight, Iran attacked a US base in Qatar but gave the US advance warning of the assault.
President Trump described the attack as "very weak" and said that US forces had "very effectively countered" Iran's 14 missiles.
He said on Truth Social:
I am pleased to report that NO Americans were harmed, and hardly any damage was done.
Most importantly, they've gotten it all out of their "system," and there will, hopefully, be no further HATE.
I want to thank Iran for giving us early notice, which made it possible for no lives to be lost, and nobody to be injured.
Yesterday, the Iranian parliament passed a resolution calling for the closure of the Strait of Hormuz, through which about 20% of global oil supplies flow.
This was a strategic risk that markets had factored in over the past fortnight.
It's a key reason why oil prices and ASX 200 energy shares spiked.
ASX 200 energy shares soared 6.49% in the first week and a further 5.31% last week amid concerns that an ongoing war would disrupt global oil supplies.
Let's check out what's happening with ASX 200 energy shares today.
ASX 200 energy shares plunge in early trading on Tuesday
The Karoon Energy share price hit a 14-month high of $2.17 yesterday.
On Tuesday, the Karoon share price is the biggest faller of the ASX 200, down 9.09% to $1.90 at the time of writing.
Woodside shares reached a 9-month high of $27.23 on 16 June.
Today, the Woodside share price is the second biggest faller of the ASX 200, currently $23.91, down 7.5%.
Third in line is the Beach Energy Ltd (ASX: BPT) share price, down 3.14% at $1.33.
Other ASX 200 oil shares dragging the energy sector lower today include Viva Energy Group Ltd (ASX: VEA), down 2.08% to $2.12.
Ampol Ltd (ASX: ALD) shares are down 1.51% to $25.48.
The Santos Ltd (ASX: STO) share price is down 1.03% to $7.70.
Oil prices drop below US$70 per barrel
The Brent crude oil price shot above US$79 per barrel yesterday after the Iranian parliament's vote, the highest level since February.
At the time of writing, Brent crude is trading at US$69.20 per barrel, down 1.25%.
The WTI oil price lifted above US$77 per barrel last Friday, the highest level since January.
Today, the WTI crude oil price is US$66.35, down 1.3%.
