Oil prices dropped steeply on Wednesday after U.S. President Donald Trump agreed to a two-week ceasefire with Iran and said Washington would assist in clearing shipping congestion in the Strait of Hormuz.
Brent crude futures — the global oil benchmark — were down 13.6% to $94.40 per barrel by 05:15 ET (09:15 GMT). U.S. West Texas Intermediate crude futures fell even more sharply, declining 15.8% to $95.20 per barrel.
Trump said Tuesday evening that he had agreed to pause military action against Iran for two weeks, just hours before a deadline of 8:00 p.m. Eastern time that required Tehran to reopen the Strait of Hormuz or face heavy strikes on key infrastructure. Earlier, Trump had warned that the United States would destroy Iran’s “civilization” if his conditions were not met.
The president said the United States had already achieved its main military objectives and noted that Iran had put forward a multi-point proposal that could form the basis of a wider agreement.
Iran also indicated a conditional readiness to de-escalate, saying that safe navigation through the Strait would be possible during the ceasefire period as long as hostilities stop and vessels coordinate movements with Iranian authorities.
The agreement followed urgent diplomatic negotiations in which Pakistan played an important mediating role, encouraging both sides to step back from the brink of escalation.
Markets had been closely watching Trump’s deadline, as it was widely expected to trigger a major intensification of the conflict. In the hours before the cutoff, oil prices had surged to multi-month highs amid fears that potential U.S. strikes could severely disrupt supply routes in the Middle East.
Earlier in the day, Trump had warned that Iran’s refusal to comply could lead to consequences where “a whole civilization could die.”
Trump offers assistance to clear Hormuz traffic
In a social media message posted Wednesday, Trump said the United States would help reduce the buildup of tanker traffic in the Strait of Hormuz. He also expressed confidence that the ceasefire would hold, describing the development as “a big day for world peace.”
Shipping through the strait — which carries roughly 20% of global oil supplies — has effectively been halted for weeks due to the risk of Iranian attacks on vessels attempting to transit the waterway. According to media reports, Iran has also been developing a system that would impose fees on certain ships passing through the strait.
Concerns have grown that a prolonged closure of the route could disrupt vital energy supplies worldwide. Analysts say investors will be watching closely to see whether shipments resume normally, as reports suggest some vessels remain uncertain about the safety of the passage.
“For markets, the most critical issue remains the status of the Strait of Hormuz. The framework appears to allow the full passage of oil tankers through the Strait, but the terms under which this would occur remain unclear,” said Neil Shearing, Group Chief Economist at Capital Economics, in a note.