LONDON — Global oil prices dropped sharply on Wednesday after the United States and Iran announced a two-week ceasefire agreement that includes the reopening of the Strait of Hormuz for safe maritime passage, traders and analysts said.
Brent crude futures fell more than 13 percent to trade near $95 a barrel in early Asian trading, while U.S. West Texas Intermediate crude declined by a similar margin to around $94-$97 a barrel, according to market reports. The declines marked one of the largest single-day drops in recent years, following President Donald Trump's announcement late Tuesday that Washington would suspend bombing and attacks on Iran, conditional on Tehran allowing "complete, immediate, and safe opening" of the strategic waterway.
The Strait of Hormuz, through which about one-fifth of global oil shipments normally pass, had seen disrupted traffic since the conflict escalated after U.S. and Israeli strikes on Iranian targets in late February. Iran had restricted maritime movements in response, contributing to elevated oil prices in recent weeks.
Iranian Foreign Minister Abbas Araghchi confirmed acceptance of the terms, stating that if attacks against Iran halted, Iranian forces would cease defensive operations. “For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration of technical limitations,” he said, according to Iranian state media.
Pakistan mediated the talks. Trump referenced conversations with Pakistani Prime Minister Shehbaz Sharif and Field Marshal Asim Munir in his announcement on Truth Social. He described Iran's 10-point proposal as a "workable" basis for further negotiations, scheduled to begin in Islamabad on Friday.
Market participants attributed the price drop to expectations of resumed oil flows through the strait, even if limited initially. Some vessels were reported to have begun transiting under Iranian coordination early Wednesday, shipping monitors indicated.
Details on the volume and pace of resumed shipping remained unclear. Analysts cautioned that full normalization could take time and that the ceasefire was temporary and conditional.
The agreement does not cover Israel's separate actions in the region, Israeli officials said.
Oil prices had risen sharply during the conflict due to supply concerns. Wednesday's declines provided relief to energy markets but remained well above pre-conflict levels, traders noted.
As of early Wednesday, monitoring of the situation in the Gulf continued, with both sides describing the pause in positive terms while emphasizing its fragile nature.
