Global oil prices fell sharply on Wednesday after the United States and Iran agreed to a conditional two-week ceasefire that includes reopening the Strait of Hormuz, a vital shipping route for Middle Eastern energy supplies. Benchmark Brent crude dropped roughly 13 percent to $94.80 per barrel (£70.73), while US-traded WTI fell more than 15 percent to $95.75. Despite the decline, oil remains well above pre-war levels of around $70 per barrel before the conflict erupted on 28 February.
The price surge over recent weeks has been driven by disruptions to oil and gas flows from the Gulf, following threats by Iran to target ships using the strait in retaliation for US and Israeli airstrikes. Analyst Saul Kavonic from MST Marquee noted that the ceasefire could allow more oil tankers stranded near the strait to resume passage, easing pressure on markets in the coming weeks.
Stock markets responded positively to the news. European shares opened higher after strong gains in Asia. London’s FTSE 100 jumped 2.53 percent, France’s CAC rose 4 percent, and Germany’s DAX increased nearly 5 percent. Asian indices also surged: Japan’s Nikkei 225 gained 5 percent, South Korea’s Kospi climbed nearly 6 percent, Hong Kong’s Hang Seng rose 2.8 percent, and Australia’s ASX 200 gained 2.7 percent. US stock futures pointed to a higher open for Wall Street.
The ceasefire announcement followed a social media post by President Donald Trump on Tuesday evening. He said US attacks would be suspended for two weeks, contingent on Iran agreeing to the “complete, immediate, and safe opening” of the Strait of Hormuz. The President had threatened that “a whole civilisation will die tonight” if no deal was reached before his 20:00 EDT Tuesday deadline. Iranian Foreign Minister Abbas Araghchi confirmed that safe passage would be possible if attacks against Iran were halted.
Energy markets remain cautious, with some production and shipping still disrupted. Kavonic said full recovery of Middle Eastern energy output would likely take months due to damage to infrastructure. Research from Rystad Energy estimates repairs to targeted facilities could cost over $25 billion, and previous strikes, such as those on Qatar’s Ras Laffan industrial hub, have reduced liquefied natural gas exports by 17 percent.
The conflict has hit Asian economies particularly hard, given their reliance on Gulf energy. The Philippines declared a national energy emergency on 24 March after petrol prices more than doubled, while airlines across the region have raised fares and cut flights in response to surging jet fuel costs. Ichiro Kutani of Japan’s Institute of Energy Economics said the ceasefire offers relief, but normalization of prices will take time.
Some vessels have already crossed the strait under negotiated safe passage agreements. Indian, Malaysian, and Philippine ships, as well as Chinese vessels, have managed transit, along with a Malta-flagged container ship owned by France’s CMA CGM and a Japanese LNG vessel. Analysts caution that while the truce brings temporary stability, confidence in a lasting peace will be essential for full restoration of regional energy flows.
