Oil Prices Drop Below $100 as US-Iran Ceasefire Eases Market Fears

Oil prices fell sharply below $100 per barrel on Wednesday after US President Donald Trump announced a two-week ceasefire agreement with Iran, easing concerns over supply disruptions in the Strait of Hormuz.

Brent crude dropped $14.51, or 13.3%, to $94.76 a barrel by 06:30 a.m. Saudi time, while US West Texas Intermediate (WTI) fell $17.16, or 15.2%, to $95.79. The decline followed days of heightened volatility driven by fears that the key shipping route could remain closed amid escalating conflict.

Trump’s decision came shortly before a deadline he had set for Iran to reopen the Strait of Hormuz, through which around 20% of global oil supply passes, or face attacks on civilian infrastructure. “This will be a double sided CEASEFIRE!” he wrote on social media, reversing an earlier warning that “a whole civilization will die tonight” if his demands were not met.

Iran signalled a willingness to cooperate under certain conditions. Foreign Minister Abbas Araqchi said Tehran would halt its attacks if strikes against it stopped, adding that safe transit through the Strait of Hormuz would be possible for two weeks in coordination with Iranian armed forces.

Despite the ceasefire announcement, tensions remain high across the region. Several Gulf states reported missile launches and drone activity or issued warnings urging civilians to take shelter, indicating that the situation on the ground remains unstable.

Analysts cautioned that while the ceasefire has reduced immediate fears, risks to oil supply have not disappeared. Saul Kavonic of MST Marquee said Iran could continue to use the strait as leverage in the future, meaning markets may continue to factor in a higher level of risk. “Even with a peace deal, Iran may be emboldened to threaten the Strait of Hormuz more frequently,” he said.

The recent conflict had already driven oil prices to record gains, with March seeing the steepest monthly increase on record at more than 50%. Analysts say some of that geopolitical risk premium is likely to persist even if tensions ease. Commonwealth Bank analyst Vivek Dhar noted that markets could continue pricing in uncertainty depending on the details of any long-term agreement.

Trump said the US had received a 10-point proposal from Iran, describing it as a workable basis for negotiations and suggesting a broader agreement could be close. Market observers remain cautious. “It’s a good start and could pave the way to a more permanent reopening, but there are still many uncertainties,” said IG analyst Tony Sycamore.

Unusual pricing patterns have also emerged, with WTI trading at a premium to Brent, reversing the typical relationship. Analysts say this reflects strong demand for immediate supply, as WTI contracts are for May delivery while Brent is priced for June.

The sharp drop in prices highlights how quickly markets can respond to geopolitical developments, even as uncertainty over the durability of the ceasefire continues.