Oil prices dipped below $100 per barrel on Wednesday following an announcement from U.S. President Donald Trump regarding a temporary two-week ceasefire agreement with Iran, contingent upon the safe and immediate reopening of the Strait of Hormuz.
The price of Brent crude futures experienced a decline of $16.32, equating to a 14.9% drop, landing at $92.95 per barrel by 0630 GMT. Meanwhile, West Texas Intermediate (WTI) crude fell by $18.16, or 16.1%, to $94.79 per barrel.
This shift in Trump’s stance occurred just ahead of a deadline he set for Iran to allow the reopening of the critical Strait of Hormuz, which serves as a transit route for 20% of the globe’s oil supply, or risk facing extensive attacks on its civilian infrastructure.
In a social media post, Trump declared, “This will be a double sided CEASEFIRE!” He had previously warned that “a whole civilization will die tonight” if his conditions were not met.
In response, Iran indicated it would cease its offensive actions if hostilities against it were halted, stating that secure passage through the Strait of Hormuz would be achievable for two weeks in collaboration with Iranian military forces, as noted by Foreign Minister Abbas Araqchi on Wednesday.
According to analysts from ING, the future trajectory of oil prices will depend on whether these discussions lead to a lasting agreement and a stable resumption of oil flows through the strait, though they cautioned that volatility is likely to continue during the negotiations scheduled for later this week.
Several Gulf nations have reported missile launches and drone strikes, with some issuing alerts for civilians to seek shelter. Analyst Saul Kavonic from MST Marquee pointed out that even with a peace arrangement, Iran might feel encouraged to issue threats regarding the Strait of Hormuz more frequently, leading the market to factor in increased risks associated with this crucial shipping route.
March witnessed the most significant monthly surge in oil prices on record, exceeding 50%, amid ongoing U.S.-Israeli tensions with Iran.
Vivek Dhar, an analyst at Commonwealth Bank, noted that there remains potential for a substantial geopolitical premium to be established in the near future, depending on the specifics of the comprehensive agreement.
Trump mentioned that the U.S. had received a 10-point proposal from Iran, which he considered a viable foundation for negotiations, asserting that both sides were making significant progress toward a long-term peace agreement.
IG analyst Tony Sycamore commented, “It’s a good start and could pave the way to a more permanent reopening – but lots of ifs still to work out.”
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