SINGAPORE: Oil prices dropped below $100 per barrel on Wednesday after US President Donald Trump announced a two-week ceasefire agreement with Iran, contingent on the immediate and secure reopening of the Strait of Hormuz.
Brent crude futures declined by $14.51, or 13.3%, to $94.76 per barrel at 0330 GMT, while US West Texas Intermediate (WTI) crude fell $17.16, or 15.2%, to $95.79 per barrel.
Trump’s reversal came just ahead of his deadline for Iran to reopen the Strait of Hormuz—through which roughly 20% of global oil supply passes or face large-scale attacks on its civilian infrastructure.
“This will be a double sided CEASEFIRE!” he wrote on social media, after earlier warning that “a whole civilization will die tonight” if his demands were not met.
Iran stated it would stop its attacks provided strikes against it ceased, adding that safe passage through the Strait of Hormuz would be ensured for two weeks in coordination with its armed forces, according to Foreign Minister Abbas Araqchi.
Despite the announcement, several Gulf countries reported missile launches and drone activity or advised civilians to seek shelter.
The US Energy Information Administration warned that fuel prices could continue to rise for months even after the Strait reopens.
“Even with a peace deal, Iran may be emboldened to threaten the Strait of Hormuz more frequently in the future, and the market will price in heightened risk to the Strait of Hormuz going forward,” said MST Marquee analyst Saul Kavonic.
The conflict between the US, Israel, and Iran drove oil prices up by more than 50% in March, marking the steepest monthly increase on record.
“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 noted that the US had received a 10-point proposal from Iran, describing it as a workable foundation for negotiations, and said both sides were progressing toward a long-term peace agreement.
“It’s a good start and could pave the way to a more permanent reopening – but lots of ifs still to work out,” said IG analyst Tony Sycamore.
WTI continued to trade at a premium over Brent—an unusual pattern—due to differences in contract timing, with WTI tied to May delivery and Brent to June, indicating stronger demand for nearer-term supply.
