Oil drops below $100 after Trump’s ceasefire announcement

Oil prices fell below $100 per barrel on Wednesday after Donald Trump announced his approval of a two-week ceasefire with Iran, on the condition of an immediate and safe reopening of the Strait of Hormuz.

Brent crude futures contracts fell by $17.47, or 16%, to $91.80 per barrel by 12:05 GMT. West Texas Intermediate (WTI) crude contracts also declined by $20.33, or 18%, to $92.62 per barrel.

Benchmark European diesel prices also dropped sharply, losing $317.25, or 20.8%, to reach $1,210.50 per metric ton.

Trump’s shift in position came shortly before the deadline he had set for Iran to reopen the Strait of Hormuz or face extensive attacks on its civilian infrastructure. Approximately 20% of the world’s daily oil supplies pass through this narrow maritime corridor.

Trump wrote on social media: “This will be a ceasefire from both sides!”, after he had earlier posted on Tuesday that “an entire civilization will die tonight” if his demands were not met.

Iran stated that it would stop its attacks if strikes against it ceased, and that safe passage through the Strait of Hormuz would be possible for two weeks in coordination with the Iranian armed forces, according to a statement by Foreign Minister Abbas Araghchi.

A senior Iranian official involved in the talks told Reuters that Iran may reopen the strait in a limited and organized manner on Thursday or Friday before a meeting between American and Iranian officials in Pakistan.

Tamas Varga, an analyst at brokerage PVM Oil Associates, said that about 10 to 13 million barrels per day of oil and product supplies stuck behind the Strait of Hormuz are expected to begin flowing gradually now.

He added: “Whether the situation that existed before March will fully return depends entirely on whether the truce can be converted into a permanent peace during the negotiations in Pakistan.”

Ship operators are still seeking clarity on logistical aspects, while refineries began inquiring about new crude shipments on Wednesday in response to the ceasefire agreement.

Several Gulf countries also detected missile launches and drone attacks, or issued warnings to civilians of the necessity to take cover.

Saul Kavonic, an analyst at MST Marquee, said: “Even with reaching a peace agreement, Iran may become more emboldened in threatening the Strait of Hormuz in the future, and the market will price in a higher level of risks associated with the strait.”

The American-Israeli war with Iran led to the largest monthly rise in oil prices in history, as the increase exceeded 50%.

Vivek Dhar, an analyst at Commonwealth Bank of Australia, said there is “room for a significant geopolitical premium to continue in prices in the foreseeable future depending on the details of the comprehensive agreement.”

Trump indicated that the United States received a 10-point proposal from Iran, which he described as a practical basis for negotiation, adding that the parties have come very close to reaching a final agreement to achieve long-term peace.

He added on Wednesday that the United States will work closely with Iran, and will discuss with Tehran the issue of easing customs duties and sanctions.