Global oil prices tumbled more than 10 percent on Friday after Iran declared the Strait of Hormuz “completely open” amid a fragile ceasefire in the Middle East, easing fears of a major disruption to global energy supplies.
The sharp drop came after Iranian Foreign Minister Seyed Abbas Araghchi said on social media platform X that vessels could transit the strategic waterway under a “coordinated route” set by Iranian maritime authorities. His comments followed a U.S.-brokered 10-day ceasefire between Israel and Lebanon, which has raised hopes of a broader de-escalation in regional tensions.
U.S. President Donald Trump said late Thursday that the conflict involving Iran, which began in February, “should be ending pretty soon,” adding that leaders from Israel and Lebanon would be invited to Washington for what he described as the first meaningful talks between the two sides in decades.
Oil markets reacted swiftly to the easing geopolitical risk premium. U.S. crude futures for May delivery fell 10.6 percent to $84.63 per barrel, while Brent crude for June delivery dropped 9.9 percent to $89.50 per barrel, according to market data.
The Strait of Hormuz, a narrow shipping lane between the Persian Gulf and the Gulf of Oman, is one of the world’s most critical energy chokepoints, with roughly a fifth of global oil consumption passing through it. Any disruption in the waterway typically triggers sharp price volatility due to concerns over supply security.
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Prices had already begun to ease earlier in the week following the announcement of the ceasefire between Israel and Lebanon. The truce, which took effect at 5 p.m. ET on Thursday, followed weeks of escalating cross-border hostilities involving Israeli strikes on Hezbollah positions in Lebanon.
The U.S. State Department said both sides had expressed willingness to create conditions for lasting peace, including improved border security and reaffirmation of sovereignty. Washington also stressed concerns over armed non-state actors undermining Lebanon’s stability.
Trump said he expects Lebanon to “take care of Hezbollah,” signalling continued U.S. pressure on Beirut to rein in the Iran-backed group, which has been a central actor in the conflict.
Analysts said the developments had significantly reduced the immediate risk of a wider regional war that could have threatened energy flows through the Gulf.
However, market watchers cautioned that the situation remained fragile.
ING warned that although oil prices were falling on expectations of extended ceasefire arrangements and possible renewed U.S.–Iran negotiations, physical supply conditions remained tight.
“However, the physical market is becoming tighter every day that passes without a restart of oil flows through the Strait of Hormuz,” ING analysts said in a note.
The bank estimated that around 13 million barrels per day of oil supply had been disrupted due to heightened tensions and shipping constraints, even with partial rerouting and limited tanker movement. That figure, it added, could rise further in the event of renewed hostilities or a breakdown in diplomatic talks.
Market analysts also highlighted lingering risks despite the temporary diplomatic breakthrough.
“The key upside risk for the market is that peace talks between the U.S. and Iran break down,” ING said, noting that the positions of both sides remain far apart despite recent progress.
The war in Iran, which began in late February, has already unsettled global energy markets and raised concerns over shipping security in the Gulf region. Any renewed escalation, analysts warn, could quickly reverse recent price declines.
For now, however, the combination of ceasefire agreements and Iran’s declaration that the Strait of Hormuz remains open has provided temporary relief to markets, sending oil prices sharply lower and easing immediate fears of supply shocks.
