Oil prices plunged sharply on Wednesday after President Donald Trump agreed to a two-week suspension of attacks on Iran in exchange for Tehran’s commitment to allow safe passage through the Strait of Hormuz, easing a crisis that had disrupted nearly one-fifth of global crude supplies.
U.S. crude futures for May delivery fell roughly 18 percent to US$92.50 per barrel by 8:48 a.m. ET, while Brent crude for June delivery dropped more than 16 percent to US$91.25 per barrel. The fall in U.S. benchmark West Texas Intermediate could mark its worst daily performance since April 2020 if prices settle more than 14.5 percent lower.
Trump framed the two-week ceasefire as a temporary measure to finalize a broader agreement with Iran. He noted that the U.S. had received a 10-point proposal from Tehran that could form the basis of negotiations.
“Almost all points of past contention have been agreed to between the United States and Iran,” Trump said in a social media post, adding that the short ceasefire will allow the agreement to be finalized and consummated.
Iranian Foreign Minister Seyed Abbas Araghchi confirmed that Tehran would allow safe passage through the Strait during the ceasefire, with operations coordinated with Iran’s armed forces while accounting for technical limitations. Araghchi emphasized that if attacks against Iran are halted, the country’s military will cease defensive operations.
More Read
The ceasefire was agreed less than two hours before Trump’s 8 p.m. ET Tuesday deadline, which had threatened severe strikes on Iranian infrastructure, including bridges and power plants. The president’s rhetoric escalated on Tuesday morning, warning that Iran’s entire civilization could be destroyed if the Strait was not reopened.
The intervention followed discussions with Pakistan Prime Minister Shehbaz Sharif, who requested a delay in the deadline to allow negotiations to continue. Sharif also urged Iran to reopen the Strait as a goodwill gesture.
Global oil supply disruption
The Strait of Hormuz is a critical chokepoint for global energy markets, connecting Persian Gulf producers to international buyers. Prior to February 28, when the U.S. and Israel attacked Iran, roughly 20% of global oil shipments passed through the narrow waterway.
More Read
The conflict had triggered the largest disruption of crude supplies in history, sending prices soaring and creating ripple effects across fuel, jet fuel, diesel, and gasoline markets. Analysts warned that prolonged disruption could cause widespread fuel shortages worldwide, particularly in energy-dependent economies.
The ceasefire and the promise of safe passage for oil tankers have alleviated immediate market fears. Still, traders remain cautious, aware that any resumption of hostilities or technical complications could reignite volatility.
Market reactions and outlook
The sudden drop in crude prices reflects pent-up risk adjustment, as investors had been pricing in extreme supply constraints. Oil companies and market observers noted that the reduction in tension around the Strait could ease logistics bottlenecks, lower shipping insurance premiums, and gradually bring down global fuel costs.
However, uncertainties remain. The temporary nature of the ceasefire means that markets will closely watch negotiations between Washington and Tehran. Analysts caution that even short-term lapses in the agreement could prompt renewed spikes in crude prices, particularly if attacks on commercial shipping resume.
For now, the market relief is tangible, with the two-week pause providing breathing room for both global energy markets and countries heavily reliant on Gulf oil. Economies vulnerable to high fuel costs, including many in Sub-Saharan Africa, could see short-term relief, though analysts warn that longer-term price stability will depend on a comprehensive settlement between the U.S., Iran, and regional stakeholders.
