Oil prices tumbled and stock markets have rallied across the world after Donald Trump said the war in Iran would end in “two to three weeks”.

Brent crude, an international benchmark for oil, fell as low as $98.35 a barrel on Wednesday, down more than 15% on the previous day and its lowest level in a week. It later recovered some ground, down 2.5% on the day at $101.

Stock markets rallied in Asia, where economies are highly exposed to shortages of oil and gas coming out of the Gulf. Japan’s Nikkei surged up 5%, while the South Korean Kospi jumped by 8%. Hong Kong’s Hang Seng rose by 2% and China’s CSI 300 index was up by 1.7%.

European stock markets followed Asia higher, with the UK’s blue-chip FTSE 100 up by 1.8% in early trading on Wednesday. The Europe Stoxx 600 index, which tracks the biggest companies across the continent, rose by 2.2%.

Trump, talking about the war in Iran, said on Tuesday: “Now we’re finishing the job. I think in two weeks or maybe a few days longer, we’ll do the job. We want to knock out everything they’ve got.”

The comments triggered a relief rally in the US stock market on Tuesday, with the S&P 500 rising by 2.9%.

The US president is expected to address the US at 9pm ET on Wednesday (2am BST on Thursday).

Emma Wall, the chief investment strategist at the broker Hargreaves Lansdown, said that markets were “choosing to believe the optimism from the White House”.

“Trump’s comments suggest that the US will call victory soon and remove their presence from the region, despite no deal being reached with Iran,” she said. “While this is expected to provide an immediate boost to stocks, energy disruption would continue for some months, and likely impact both inflation and economic growth.”

Nevertheless, City traders started to pare back their bets on UK interest rate rises this year.

Money markets priced in about 41 basis points of increases to the UK bank rate by the end of 2026, which suggests that investors are no longer expecting two quarter-point rises. On Tuesday, the market had been anticipating 66 basis points of rate rises by Christmas, implying two rate rises.

The price of gold, which jumped by 3.5% on Tuesday, rose by another 0.8% on Wednesday to its highest level in almost two weeks, to more than $4,700 an ounce.