LONDON – Global oil prices dropped below $100 per barrel on Wednesday following U.S. President Donald Trump’s announcement of a two-week ceasefire with Iran, contingent on the immediate and safe reopening of the Strait of Hormuz.
Brent crude fell $15.02, or 13.8 percent, to $94.25 a barrel, while West Texas Intermediate (WTI) dropped $17.43, or 15.4 percent, to $95.52 per barrel. European diesel benchmark prices also declined by $271.50, or 17.8 percent, to $1,256.25 per metric ton.
Trump’s statement came just hours before his deadline for Iran to reopen the strategic waterway, through which about 20 percent of the world’s oil flows, or face potential U.S. attacks on its civilian infrastructure. He wrote on social media, “This will be a double sided CEASEFIRE” after earlier warning that “a whole civilization will die tonight” if his demands were not met.
Iran responded that it would halt its attacks if hostilities against it stopped and that safe passage through the Strait would be coordinated with Iranian armed forces for two weeks, according to Foreign Minister Abbas Araqchi.
Oil analyst Tamas Varga of PVM Oil said, “In theory, the 10 to 13 million barrels per day of crude oil and product supply stranded behind the Strait should now be gradually released. Whether the pre-March status quo will be re-established depends entirely on whether the truce can be turned into a permanent peace during the negotiations in Pakistan.”
Despite the ceasefire, several Gulf states reported missile launches and drone warnings to civilians. Saul Kavonic from MST Marquee said that Iran may still threaten the Strait in the future, keeping the market on alert.
The U.S. and Israeli conflict with Iran previously caused oil prices to spike over 50 percent in a single month. Commonwealth Bank analyst Vivek Dhar said, “There is still scope for a significant geopolitical premium being entrenched for the foreseeable future based on the details of the comprehensive agreement.”
Trump confirmed that the U.S. received a 10-point proposal from Iran, which he described as a workable foundation for negotiations, and said both sides were close to a long-term peace agreement. IG analyst Tony Sycamore added, “It is a good start and could pave the way to a more permanent reopening but lots of ‘ifs’ still to work out.”
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