Global oil markets suffered their sharpest one-day sell-off in years on Wednesday after President Donald Trump declared a surprise two-week ceasefire with Iran, conditional on the immediate and safe reopening of the Strait of Hormuz.
Brent crude futures, the international benchmark, plunged $15.02, or 13.8 percent, to $94.25 a barrel by 0805 GMT. West Texas Intermediate (WTI) fell even harder, shedding $17.43, or 15.4 percent, to $95.52 a barrel. Benchmark European diesel prices collapsed $271.50, or 17.8 percent, to $1,256.25 a metric ton — the largest single-day drop on record for the fuel.
The dramatic reversal came hours before Trump’s self-imposed deadline for Iran to guarantee safe passage through the strait or face what he had warned would be “widespread attacks on its civilian infrastructure.” In a social-media post late Tuesday, the president had issued a stark ultimatum: “A whole civilization will die tonight” if his demands were not met. By Wednesday morning, his tone had flipped. “This will be a double sided CEASEFIRE!” he wrote, confirming the truce.
Iran’s Foreign Minister Abbas Araqchi said Tehran would immediately halt its attacks provided strikes against it also stopped. Safe transit through the strait would be restored for two weeks “in coordination with Iranian armed forces,” he added in a carefully worded statement.
The news triggered an instant release of pent-up supply anxiety. Roughly 10 to 13 million barrels per day of crude and refined products had been effectively stranded behind the strait since the escalation of the U.S.-Israeli conflict with Iran. “In theory, that supply should now be gradually released,” said Tamas Varga, senior analyst at brokerage PVM Oil Associates. “Whether the pre-March status quo will be re-established depends entirely on whether the truce can be turned into a permanent peace during the negotiations in Pakistan.”
The ceasefire caps the most volatile chapter in oil-market history in decades. The U.S.-Israeli war with Iran produced the steepest monthly price surge on record — more than 50 percent — as Tehran repeatedly threatened to close the strait and missiles flew across the Gulf.
Even with the temporary deal, analysts warned that the geopolitical premium is unlikely to vanish overnight. “Iran may be emboldened to threaten the Strait of Hormuz more frequently in the future,” said Saul Kavonic of MST Marquee. “The market will price in heightened risk to the strait going forward.”
Commonwealth Bank analyst Vivek Dhar noted that “there is still scope for a significant geopolitical premium being entrenched for the foreseeable future based on the details of the comprehensive agreement.”
Trump told reporters the United States had received a 10-point proposal from Iran that he described as “a workable basis to negotiate.” He said both sides were “very far along” on a definitive long-term peace agreement. Market reaction was measured. “It’s a good start and could pave the way to a more permanent reopening — but lots of ‘ifs’ still to work out,” said Tony Sycamore, senior analyst at IG.
Several Gulf states reported missile launches and drone activity overnight and issued shelter-in-place warnings to civilians, underscoring how close the region came to a wider conflagration. With the two-week clock now ticking, diplomats in Pakistan will attempt to transform what is essentially a tactical pause into a lasting settlement.
For now, however, the oil market has delivered its verdict: relief, but no illusions. Prices below $100 a barrel may feel like a return to normal, yet traders and analysts alike are watching every word out of Tehran, Washington and the negotiating table in Pakistan. The next two weeks will determine whether this ceasefire marks the beginning of the end of the crisis — or merely a brief intermission before the next oil shock.
WHAT YOU SHOULD KNOW
Oil prices crashed below $100 per barrel after President Donald Trump announced a two-week ceasefire with Iran, paving the way for the immediate reopening of the Strait of Hormuz.
The dramatic 13.8–15.4% drop in Brent and WTI crude was driven by the sudden de-escalation of the U.S.-Israeli conflict with Iran, which had previously triggered the steepest monthly oil price surge in history.
Supply is expected to gradually return, analysts caution that a lasting peace remains uncertain and a heightened geopolitical risk premium may persist in oil markets going forward.