By Elsie Kamsiyochi
Oil prices plunged on Wednesday, falling beneath the closely watched $100-per-barrel threshold, after U.S. President Donald Trump announced that Washington and Tehran had agreed to a two-week ceasefire—an unexpected move that immediately reverberated through global energy markets.
Brent crude futures tumbled $14.83, or nearly 14%, to $94.44 a barrel as of late morning trading in New York, while U.S. West Texas Intermediate (WTI) crude slid even more sharply, dropping $17.92, or almost 16%, to $95.03. The startling decline marked one of the steepest single-day oil price reversals since hostilities in the Middle East flared months ago.
The dramatic shift came after Trump said the agreement would take effect only if Iran promptly and safely reopened the Strait of Hormuz, the narrow maritime chokepoint through which roughly 20% of the world’s oil supply flows each day. Any disruption in this vital corridor inevitably rattles global markets, and Wednesday was no exception.
UBS analyst Giovanni Staunovo noted that traders were rapidly unwinding bullish bets, pricing in the possibility of short-term calm after weeks of escalating tensions. “Investors are focused on de-escalation,” he said, adding that the ceasefire announcement triggered a wave of selling across the sector.
Trump posted celebratory messages online, proclaiming that the deal would represent a “double-sided CEASEFIRE,” though his tone had been far more ominous just hours earlier, when he warned that “a whole civilization will die tonight” if Iran failed to comply with U.S. demands.
Yet despite diplomatic progress, uncertainties remained. Shipping sources reported that the Strait of Hormuz was still effectively closed on Wednesday. Iranian naval forces were said to be threatening to destroy vessels attempting to transit without explicit permission, prolonging the paralysis of one of the world’s most critical arteries for crude exports.
Iran’s foreign minister, Abbas Araqchi, stated that Tehran was prepared to halt its attacks if it received reciprocal guarantees and that the strait could operate safely for two weeks under coordinated oversight by Iranian armed forces. A senior Iranian official added that a limited, controlled reopening could occur by Thursday or Friday, ahead of pivotal talks between U.S. and Iranian negotiators in Pakistan.
Analysts say ensuring safe passage through the strait will be central to restoring stability. Raymond James analyst Pavel Molchanov cautioned that oil prices are unlikely to return to pre-war levels until shipping flows normalize and the risk premium tied to the conflict meaningfully declines.
Even with the ceasefire announcement, tensions remained high. Within hours of the agreement, Iran reportedly struck Saudi Arabia’s East-West Pipeline—its only viable route for crude exports since the outbreak of hostilities—according to an industry source. Several Gulf countries also reported intercepting missiles or drones and issued civilian shelter warnings early Wednesday.
Trump later said that the U.S. had received a “workable” 10-point proposal from Iran that could form the foundation for longer-term peace negotiations. He added that Washington would begin discussing tariff and sanctions relief with Tehran as part of the broader diplomatic process.
Meanwhile, U.S. government data added another twist to the day’s volatility. Crude futures clawed back some losses after the Energy Information Administration reported that American crude stockpiles rose by 3.1 million barrels last week—far above expectations of a modest 701,000-barrel build. The larger-than-expected inventory increase further complicated the market’s read on global supply-demand dynamics amid geopolitical uncertainty.
As traders, refiners, and shippers scrambled to understand the evolving situation, the day ended with more questions than answers. The ceasefire generated a sense of cautious optimism, but persistent attacks, unclear shipping conditions, and the fragility of the agreement continued to overshadow hopes for a sustained return to stability.
For now, the world is watching the Strait of Hormuz—and the unfolding diplomacy surrounding it—as the clearest indicator of whether oil prices will stabilize or lurch into yet another cycle of volatility.
Original article
Comments