Global oil prices fell sharply on Wednesday after US President Donald Trump announced a conditional two-week ceasefire with Iran, tied to the immediate and safe reopening of the Strait of Hormuz. Brent futures fell $15.02, or 13.8%, to $94.25 a barrel, while West Texas Intermediate (WTI) crude slid $17.43, or 15.4%, to $95.52 a barrel. European diesel prices also declined, dropping $271.50, or 17.8%, to $1,256.25 per metric ton.
Trump’s announcement came just hours before a deadline he had set for Iran to reopen the Strait of Hormuz, a key oil transit route carrying around 20% of the world’s oil supply. The president had previously threatened attacks on Iranian bridges, power plants, and other civilian infrastructure if the Strait remained closed, warning in a social media post that “a whole civilization will die tonight” if his demands were not met.
In a statement, Iranian Foreign Minister Abbas Araqchi confirmed that the country would halt its attacks if assaults against it ceased, adding that safe transit through the Strait would be possible for two weeks under the coordination of Iranian armed forces.
Energy analysts said the ceasefire could ease disruptions that have affected global markets since February. “In theory, the 10–13 million barrels per day of crude oil and product supply stranded behind the Strait should now be gradually released,” said Tamas Varga, an analyst at brokerage PVM Oil. He noted, however, that whether pre-war supply levels are fully restored will depend on whether the temporary truce can evolve into a permanent peace during ongoing negotiations in Pakistan.
Despite the ceasefire, several Gulf states reported missile launches and drone activity, prompting alerts for civilians to take shelter. Analysts warned that even with a truce, Iran might continue to pose a threat to the Strait of Hormuz, keeping energy markets cautious. “Even with a peace deal, Iran may be emboldened to threaten the Strait more frequently in the future, and the market will price in heightened risk going forward,” said Saul Kavonic of MST Marquee.
The recent US-Israeli military campaign in Iran had driven oil prices to historic monthly gains of more than 50%. Analysts said the geopolitical risk premium could remain high. “There is still scope for a significant geopolitical premium being entrenched for the foreseeable future based on the details of the comprehensive agreement,” said Commonwealth Bank analyst Vivek Dhar.
Trump said the United States had received a 10-point proposal from Iran that provides a workable basis for negotiation, and that discussions were advancing toward a long-term peace agreement. Tony Sycamore, an analyst at IG, said the ceasefire marks a positive start, but added, “It could pave the way to a more permanent reopening, but lots of ‘ifs’ still need to be worked out.”
The announcement provided immediate relief to global markets, with oil prices dropping sharply and traders hoping the temporary ceasefire will reduce the risk of further disruption in the region.
