Hormuz Temporarily Opened, Oil Plunges
Oil prices fell sharply on Wednesday (April 8) after US President Donald Trump agreed to a two-week ceasefire with Iran and said Washington would help ease shipping congestion in the Strait of Hormuz. Brent fell 13.6% to US$94.40/barrel at 5:15 a.m. ET, while WTI plunged 15.8% to US$95.20/barrel.
The deal was announced Tuesday evening, just hours before Trump's 8:00 p.m. ET deadline for Tehran to open Hormuz or face a major attack on critical infrastructure. Trump said the US had achieved its core military objectives and cited Iran as presenting a multi-point proposal that could form the basis of a broader agreement. Iran signaled a willingness to de-escalate conditionally: safe passage through Hormuz would be possible during the ceasefire, provided the attacks ceased and shipping was coordinated with Iranian authorities. Pakistan was said to be acting as a mediator in the last-minute diplomacy.
The market reaction reflected the decline in the supply risk premium that had driven prices to high levels in the hours leading up to the deadline. As the risk of a prolonged shutdown receded, the market began pricing in the normalization of oil flows through the channel that typically handles around 20% of global oil flows. The key transmission channel: the possibility of physical supply recovery weighed on oil prices, easing energy inflationary pressures and providing some room for riskier assets, although sensitivity to geopolitical headlines remained high.
Trump reiterated on Wednesday that the US would help smooth the "traffic buildup" in Hormuz and expressed optimism that the ceasefire would hold. However, the market will still test the reality on the ground, given that the strait has been effectively blocked for several weeks and some vessels reportedly remain uncertain about the safety of passage. The next focus will be on the speed of the restoration of tanker flows, the shipping coordination mechanism with Iranian authorities, and whether the reported passage fee scheme will impact trade.
Source: Newsmaker.id
