Oil markets fell sharply on Friday after Iran announced that the Strait of Hormuz was open to commercial shipping for the remainder of a ceasefire period and US President Donald Trump signalled that a wider agreement with Tehran was close.
Brent crude dropped $12.87, or 12.95%, to $86.52 a barrel after briefly touching $86.09. US West Texas Intermediate fell $13.50, or 14.26%, to $81.19 a barrel after sliding to $80.56. Both benchmarks hit their lowest levels since early March and recorded their steepest single-day losses in weeks.
Iranian Foreign Minister Abbas Araghchi said the strategic waterway, through which roughly a fifth of global oil and liquefied natural gas flows, would remain open during the ceasefire linked to a broader regional truce involving Lebanon. The announcement followed weeks of disruption that had driven prices higher after military tensions escalated in the Middle East.
US President Donald Trump welcomed the development, saying Iran had agreed not to close the Strait again and suggesting negotiations were close to producing a formal deal. He also said Tehran had indicated it would avoid pursuing nuclear weapons for at least two decades, describing talks as “very close” to resolution.
Markets responded quickly to the easing of supply fears, although analysts warned that conditions remained fragile. UBS commodities strategist Giovanni Staunovo said the key question would be whether tanker traffic through the strait increases in practice, noting that a declaration alone does not guarantee normal flows.
Earlier in the session, prices had already been trending lower amid reports of possible weekend negotiations between Washington and Tehran and a 10-day ceasefire between Israel and Lebanon, both of which improved sentiment across energy markets.
Despite the optimism, uncertainty persists. A US official confirmed that a military blockade involving more than 10,000 personnel remains in place, suggesting that operational restrictions on Iranian-linked shipping have not been fully lifted.
Analysts also cautioned that supply chains would take time to normalise even if diplomatic progress continues. SEB Research’s Ole Hvalbye said it takes around three weeks for crude shipments from the Gulf to reach European hubs such as Rotterdam, meaning physical supply relief would be delayed.
Tamas Varga of PVM Oil Associates added that renewed disruption remains possible if negotiations over Iran’s nuclear programme and sanctions relief stall, leaving the Strait of Hormuz vulnerable to renewed restrictions.
For now, traders are pricing in reduced risk, but markets remain sensitive to any reversal in the fragile diplomatic momentum.
