Oil Plunges After Two-Week US-Iran Ceasefire
Crude oil prices fell sharply below US$100 per barrel after the United States and Iran agreed to a two-week ceasefire expected to halt the US-Israeli military campaign, provided Tehran reopens the Strait of Hormuz. The price decline reflects the reduction of the geopolitical risk premium previously accumulated in the energy market.
Brent crude oil briefly plunged as much as 16% before trading around US$94 per barrel. West Texas Intermediate (WTI) also fell sharply, last hovering near US$96, its biggest drop in nearly six years. At 12:17 p.m. in Singapore, Brent for June settlement was down 14% at US$94.39 per barrel, while WTI for May delivery was down 15% at US$96.10 per barrel.
President Donald Trump said the ceasefire was conditional, contingent on the opening of the Strait of Hormuz, and aimed at “finalizing the deal.” Iran, through Foreign Minister Abbas Araghchi, stated that safe navigation in the waterway would be possible for two weeks in coordination with the armed forces. A White House official said Israel had also agreed to a pause in hostilities.
A series of follow-up negotiations are also in the market focus. US and Iranian delegations are said to have been invited to meet in Islamabad on Friday to discuss a more conclusive agreement. The Associated Press reported that current plans include the possibility of Iran and Oman imposing fees on ships passing through the Strait of Hormuz, while the US will help ease traffic congestion in the waterway.
The decline was not limited to crude oil. Refined product prices also fell, with European diesel futures falling as much as 23% (the biggest drop in more than four years), while Abu Dhabi's Murban contract fell 19%, the biggest drop since the contract was launched in 2021. Trading activity also increased, with about 240,000 Brent contracts changing hands in the first hour of trading, well above the normal early-session pace.
However, physical market players remain cautious and await evidence that the ceasefire is truly holding before re-securing cargo from the Gulf. Shipowners have stated that they need to see ships safely exit the area before sending tankers, amid reports that more than 800 vessels were stranded by the fighting. The market is now assessing the details of the implementation of the opening of the Strait of Hormuz, which will determine whether price declines continue or volatility increases again if negotiations stall
5 Key Points:
- Brent fell as much as 16% and traded around US$94; WTI was last near US$96.
- The main trigger: the two-week US-Iran ceasefire, conditional on the opening of the Strait of Hormuz.
- Further negotiations are expected to take place Friday in Islamabad to finalize the details of the agreement.
- Refined products also fell: European diesel plunged by 23%; Abu Dhabi Murban fell 19%.
- Market players are awaiting signs that the ceasefire is holding and safe passage is truly restored.
Source: Newsmaker.id
