Crude oil prices experienced a significant decline Tuesday evening, dropping below $100 per barrel following the announcement of a two-week ceasefire between the U.S. and Iran. The deal, proposed by Pakistan, marks the largest one-day plunge in oil prices since the 1991 Gulf War.
Market Impact
The global benchmark Brent crude futures price fell approximately 16% to $93 a barrel, while the U.S. benchmark WTI dropped nearly 19% to around $92. Despite the decline, prices remain elevated compared to pre-war levels, which stood at roughly $73 a barrel in late February.
The de facto closure of the Strait of Hormuz has caused the largest disruption in oil market history.
Ceasefire Terms
President Trump stated that the agreement hinges on Iran ensuring the "complete" reopening of the Strait of Hormuz, a critical waterway that handles about a quarter of the world's seaborne oil trade. The closure of the strait has severely disrupted global oil supplies, driving prices to record highs earlier this month.
Market Uncertainty
Industry watchers are now focused on whether shippers will regain confidence in the safety of the Strait of Hormuz to resume shipments of oil and liquefied natural gas. Meanwhile, Middle Eastern producers continue to grapple with supply disruptions after reducing output in response to the crisis.
As of March, Iraq, Saudi Arabia, Kuwait, UAE, Qatar, and Bahrain collectively shut in 7.5 million barrels per day of crude production, according to U.S. Energy Department data. This figure has risen further in April, exacerbating market volatility.