both plummeted after the US and Iran agreed to a two-week ceasefire aimed at halting the American-Israeli military campaign in exchange for a reopening of the Strait of Hormuz.
Brent fell as much as 17 per cent before trading around $92 a barrel, while European natural gas futures posted their biggest decline in more than two years, shedding as much as 20 per cent.
Prices of refined fuels such as diesel and jet fuel — which had been the biggest threats to global inflation — also tumbled.
Much will now depend on how quickly transit through Hormuz can resume. It’s the route for about a fifth of global oil and liquefied natural gas supplies, and the near-halt of traffic has pushed prices for real-world crude to a record.
Faced with an unprecedented disruption to flows, the world is rapidly running down supply buffers to offset the loss.
“It would take something truly tremendous for us to get back down below $80 a barrel,” Jason Schenker, president and chief economist at Prestige Economics LLC, told Bloomberg Television. “But almost anything going wrong in these ceasefire talks could very quickly put us back above $100.”
President Donald Trump said Wednesday that the US is discussing tariff and sanctions relief with Iran, according to a post on his Truth Social network. Washington waived some restrictions on Iranian oil during the conflict in a bid to keep markets well-supplied. A comprehensive package of relief could bring more barrels to Western buyers in time.
Trump also said earlier that the US would help ease the buildup of traffic in Hormuz. For now, the strait appears to remain largely blocked, with just seven ships seen exiting the region since Tuesday morning, while three entered, according to tracking data compiled by Bloomberg.
While the ceasefire is welcome, “it is highly unlikely that trade into the Gulf will simply resume,” said Neil Roberts, head of marine and aviation at insurance organization the Lloyd’s Market Association. “The region remains at heightened risk with none of the underlying tensions resolved.”
It wasn’t clear on Wednesday when the truce would take effect — with reports of ongoing hostilities rife across the Persian Gulf.
Even once Hormuz transit picks up, the return of energy supplies won’t be instant. Output has been reduced at oil and gas fields, while refineries have curtailed production or shut down. Some of those will take weeks to return to normal.
In Qatar, which took its giant Ras Laffan LNG complex offline in early March following Iranian attacks, engineers and workers are mobilizing with the aim of resuming production, according to people with knowledge of the matter. Some production could resume over the coming days, though it’s not clear how quickly it could ramp up and any return to significant output would require ships to be able to pass through Hormuz.
Further Talks
American and Iranian delegates are invited to meet in Islamabad on Friday to further negotiate a “conclusive agreement,” Pakistani Prime Minister Shehbaz Sharif — a key mediator — said on X.
The current plan for Hormuz includes allowing Iran and Oman to charge fees on ships passing through, the Associated Press reported, though Oman itself said maritime agreements prevent it from enforcing tolls.
Iran accepted Pakistan’s ceasefire proposal, with safe passage through the strait possible in coordination with the nation’s armed forces, Foreign Minister Abbas Araghchi said. Israel also agreed to the pause in fighting, but said it didn’t include Lebanon. The Israel Defense Forces subsequently said it had carried out its largest operation against Hezbollah since the start of the war.
The plunge in European gas came shortly after many investors in the fuel had amassed near-record net-bullish positions, leaving the market poised for a slump. In oil, futures tied to Abu Dhabi’s flagship Murban crude dropped as much as 20 per cent, the most since the contract’s launch in 2021.
“In theory, the 10–13 million barrels a day of crude oil and product supply stranded behind the strait should now be gradually released,” said Tamas Varga, an analyst at brokerage PVM. “Whether the pre-March status quo will be re-established depends entirely on whether the truce can be turned into a permanent peace.”
Physical traders remain cautious, waiting for clearer signs the ceasefire will hold before seeking cargoes from the Gulf. Meanwhile, shipowners said they needed to see vessels safely exit the region before sending in tankers. At present, there are more than 800 vessels that have been trapped by the war.
“The ceasefire may create transit opportunities, but it does not yet provide full maritime certainty and we need to understand all potential conditions attached,” said A.P. Moller-Maersk A/S, the world’s second-largest container line.
Trump’s announcement came about 90 minutes before his deadline for Iran to reopen the strait or face a massive bombardment. The lead-up was marked by military escalation and bellicose threats from the US president, including a post saying “a whole civilization will die tonight.”
“This was a market that had been starved of good news,” said Josh Gilbert, an analyst at eToro Ltd. “We’ve seen an instant selloff in crude, pulling back 16 per cent to under $100 as markets price in the prospect of the Strait of Hormuz reopening. It goes to show how much geopolitical risk was baked into crude, and how quickly it can unwind when there’s a credible path to de-escalation.”
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