Oil prices plunged below $100 in early Asian trading on Wednesday after President Trump announced a conditional two-week ceasefire agreement with Iran.
At the time of writing, WTI had dropped by 13.96% to trade at $97.18, while Brent Crude had fallen to $95.05, down 13.01% on the day.
The dramatic selloff came on the back of Trump committing to a two-week suspension of military operations against Iran if the country immediately restores safe passage through the Strait of Hormuz.
“This will be a double sided CEASEFIRE!” Trump said on social media, marking a sharp reversal from his earlier warning that “a whole civilization will die tonight” if Iran failed to comply with U.S. demands.
Iran’s Foreign Minister, Abbas Araqchi, confirmed that Tehran would halt attacks provided strikes against Iran cease and transit through the Strait is coordinated by Iranian forces.
Despite the breakthrough, tensions remain elevated across the region, with several Gulf states reporting missile launches, drone activity, or issuing civil defense warnings.
While oil prices have fallen back below $100, they remain significantly elevated after surging by a record amount in March. Regardless of how successful the ceasefire is, geopolitical risk related to the Strait of Hormuz is likely to remain elevated for the foreseeable future under the control of Iran.
Trump indicated that negotiations may be progressing toward a more durable agreement, citing a 10-point proposal from Iran that he described as a “workable basis” for long-term peace.
Pakistan’s Prime Minister has invited both sides to Islamabad on Friday to negotiate a conclusive agreement and settle all disputes.
For now, oil markets are breathing a sigh of relief, but volatility isn’t going anywhere as traders continue to watch developments across the region. Ultimately, the single most important factor to watch will be how many tankers cross the Strait of Hormuz with this new agreement in place.
By Josh Owens for Oilprice.com
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