Oil declined below $100 per barrel on Wednesday following U.S. President Donald Trump’s announcement of a two-week ceasefire agreement with Iran, contingent upon the immediate and secure reopening of the Strait of Hormuz. Brent declined by $14.84, representing a 13.6% decrease, settling at $94.43 per barrel, while WTI experienced a drop of $16.13, or 14.3%, reaching $96.82 per barrel as of 0023.
Trump’s turnaround occurred just prior to his deadline for Iran to open the Strait of Hormuz, a critical passage through which 20% of the world’s oil transits, or confront extensive attacks on its civilian infrastructure. “This will be a double sided CEASEFIRE!” he wrote on social media, after posting earlier on Tuesday that “a whole civilization will die tonight” if his demands were not met. Iran announced that it would cease its attacks if hostilities directed at it were to stop, asserting that safe passage through the Strait of Hormuz would be feasible for a duration of two weeks, coordinated with Iranian armed forces, as stated by Foreign Minister Abbas Araqchi on Wednesday.
Nonetheless, several Gulf states have reported missile launches and drone attacks or have advised civilians to seek shelter. “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,” analyst Saul Kavonic stated. The conflict between the U.S. and Israel against Iran resulted in an unprecedented monthly increase in oil prices in March, exceeding 50%. Trump stated that the U.S. had received a 10-point proposal from Iran, which he described as a viable foundation for negotiations. He indicated that the parties were significantly advanced in their efforts to achieve a definitive agreement for long-term peace.
“It’s a good start and could pave the way to a more permanent reopening – but lots of ifs still to work out,” stated analyst Tony Sycamore. WTI has sustained its price premium over Brent, marking a departure from usual pricing trends. This phenomenon is attributed to its delivery contract set for May, in contrast to Brent’s June contract, indicating that barrels scheduled for earlier delivery are fetching a higher price.