Global crude oil prices have dropped below the $100 per barrel threshold following US President Donald Trump's declaration of a two-week ceasefire agreement with Iran. This development is tied to the condition of the immediate and secure reopening of the Strait of Hormuz, a critical artery for global oil transit, which has provided a temporary relief to market anxieties.
Benchmark Brent crude futures experienced a significant decline, falling by $14.51, or 13.3%, to settle at $94.76 per barrel by 03:30 GMT. Concurrently, West Texas Intermediate (WTI) saw a steeper drop of $17.16, or 15.2%, closing at $95.79 a barrel, underscoring the market's strong reaction to the US-Iran announcement.
President Trump's statement marked a notable shift from his earlier aggressive stance on Tuesday, where he had warned of severe consequences for Iran if its demands were not met. He later clarified that the ceasefire would be a mutual understanding, emphasizing the agreed-upon pause in hostilities.
In response, Iran indicated it would suspend attacks provided that offensive actions against it ceased. According to a statement from Foreign Minister Abbas Araqchi on Wednesday, Iran agreed that transit through the Strait of Hormuz would be facilitated for a two-week period, in coordination with its armed forces.
Despite the ceasefire announcement, reports from several Gulf states indicated ongoing regional instability, including missile launches and drone attacks, with advisories issued for civilians to seek shelter.
Saul Kavonic, an analyst at MST Marquee, commented that even with a peace accord, Iran might be emboldened to pose more frequent threats to the Strait of Hormuz in the future, suggesting that the market will likely factor in increased risk for the passage going forward.
The conflict between the US and Iran had previously triggered the largest monthly surge in oil prices historically in March, with rates escalating by over 50%. Experts caution that geopolitical risks persist, and the sustainability of a significant risk premium in global oil markets will depend on the longevity of this ceasefire.
Vivek Dhar, an analyst at Commonwealth Bank, noted that "There is still scope for a significant geopolitical premium being entrenched for the foreseeable future based on the details of the comprehensive agreement."
President Trump mentioned that the US had received a 10-point proposal from Iran, which he deemed a viable foundation for negotiations. He further stated that the parties were "very far along on reaching a definitive agreement for long-term peace."
Erizia Rubyjeana
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