Oil Drops 14% After Trump Announces Ceasefire

SadaNews Economy - Oil fell below $100 a barrel on Wednesday after U.S. President Donald Trump announced his agreement to a two-week ceasefire with Iran, provided that the Strait of Hormuz is reopened immediately.

Brent crude dropped by $14.84, or 13.6%, to $94.43 per barrel, while West Texas Intermediate crude decreased by $16.13, or 14.3%, to $96.82 per barrel, as of 00:23 GMT.

Trump's change of stance came shortly before the deadline he set for Iran to reopen the Strait of Hormuz, through which about 20% of the world's oil typically passes, or face widespread attacks on its civilian infrastructure, according to Reuters.

He wrote on social media, "This will be a ceasefire from both sides!" after he previously threatened on Tuesday that "a whole civilization will perish tonight" if his demands were not met.

Iranian Foreign Minister Abbas Araghchi stated on Wednesday that his country would stop retaliatory attacks if the attacks on it ceased, and that safe passage through the Strait of Hormuz would be possible for two weeks in coordination with the Iranian armed forces.

SadaNews analyst at MST Market, Sol Kafonik, said: "Even with a peace agreement, Iran might dare to threaten the Strait of Hormuz more frequently in the future, and the market will take into account the increasing risks to the strait going forward."

The U.S.-Israeli war on Iran saw the largest monthly rise in oil prices in history, with prices soaring by over 50% in March.

Trump mentioned that the U.S. received a 10-point proposal from Iran, which he described as a practical basis for negotiation, adding that both parties have come a long way towards reaching a final agreement for long-term peace.

Tony Sycamore, an analyst at IG, stated, "It’s a good start and could pave the way for a more sustainable reopening - but there are still many possible outcomes."

West Texas Intermediate crude maintained its price premium over Brent crude, reflecting usual pricing patterns since its futures contracts are for delivery in May, while Brent futures are for delivery in June, as barrels with nearer delivery dates fetch higher prices.