LONDON: Oil prices fell sharply below $100 a barrel on Wednesday after U.S. President Donald Trump announced a two-week ceasefire agreement with Iran, contingent on the reopening of the Strait of Hormuz.
Brent crude futures dropped $15.02, or 13.8%, to $94.25 a barrel by 0805 GMT, while U.S. West Texas Intermediate (WTI) fell $17.43, or 15.4%, to $95.52.
The price decline followed Trump’s announcement, made shortly before a deadline he had set for Iran to reopen the Strait of Hormuz or face further escalation. The waterway carries about 20% of global oil shipments.
“This will be a double-sided ceasefire,” Trump said on social media, after earlier warning of severe consequences if Iran failed to comply.
Iran said it would suspend its attacks provided strikes against it cease, 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.
Analysts said the agreement could ease supply disruptions, with millions of barrels of crude previously stranded behind the strait expected to gradually return to the market.
“In theory, supply flows should begin to normalise,” said Tamas Varga of PVM Oil, noting that a full recovery would depend on whether the ceasefire leads to a longer-term settlement.
Despite the market reaction, risks remain elevated. Several Gulf states reported missile and drone activity or issued civil defence warnings during the conflict.
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“Even with a ceasefire, markets may continue to price in heightened risk around the Strait of Hormuz,” said Saul Kavonic of MST Marquee.
The conflict between the United States, Israel and Iran had driven oil prices up more than 50% over the past month, marking one of the steepest increases on record.
Analysts said a geopolitical risk premium is likely to persist until a more durable agreement is reached.
Trump said Washington had received a proposal from Iran that could form the basis for broader negotiations, adding that the parties were close to reaching a longer-term deal.
“It’s a positive step, but uncertainty remains,” said IG analyst Tony Sycamore, noting that much will depend on the outcome of upcoming talks.
