SINGAPORE: U.S. Treasuries surged on Wednesday after a two-week ceasefire in the Middle East triggered a relief rally across assets ​as investors wagered ⁠that sliding oil prices could keep inflation in check and possibly bring rate ‌cuts back on the table.

U.S. President Donald Trump on Tuesday agreed to a ceasefire with Iran, less ​than two hours before his deadline for Tehran to reopen the critical Strait of Hormuz or ​face devastating ​attacks on its civilian infrastructure.

The deal could pave the way for the strategic waterway that typically carries about 20% of the world's oil and gas to ⁠be reopened, sending oil prices below $100 per barrel and stocks soaring.

Reaction was also swift in the bond market. U.S. 10-year yields, which rise when Treasury prices fall, were last down 10 basis points at 4.243%. U.S. 30-year yields slid 7.5 bps to 4.846%.

On the ​front end of ‌the curve, the ⁠two-year yield , which ⁠reflects interest rate expectations, fell 10.9 bps to 3.723%.

Traders are pricing coin-toss odds that the ​Federal Reserve could cut rates at its last meeting of the ‌year, according to the CME Group's FedWatch tool. A ⁠day earlier, they had ascribed a 74.5% probability that the Fed would remain on hold.

Markets had broadly expected two U.S. rate cuts before the war broke out in February.

Charu Chanana, chief investment strategist at Saxo, pointed out that Brent crude is still well above its pre-war February level, saying the disrupted output and shipping delays may take longer to normalise than the headline move in oil suggests.

"I would not assume markets will simply go back to pricing in the same number of ‌cuts they had before the war. The bigger worry is that ⁠some damage may linger even with de-escalation."

Investor focus will ​be on March inflation data, due on Friday, to see the impacts of the war on prices.

A stronger-than-expected U.S. payrolls report for March last Friday triggered a selloff in Treasuries. ​The data ‌had cemented expectations that the Fed will hold rates steady for ⁠longer even in the midst of ​an easing cycle.

(Reporting by Ankur Banerjee in Singapore; Editing by Subhranshu Sahu)