Following a Pakistani-mediated agreement, President Trump announced a two-week ceasefire with Iran, triggering a significant drop in global oil prices Wednesday.
Oil Prices Fall Sharply After Trump’s Announcement
Oil prices experienced a substantial decline on Wednesday, marking the largest drop in nearly six years, after President Trump announced his agreement to a Pakistani proposal for a two-week ceasefire in the conflict with Iran.
West Texas Intermediate crude oil futures for delivery in June were trading at $96.20 per barrel on the NYMEX in New York, down 14.83%. Brent crude on the ICE for June was priced at $94.46 per barrel, a decrease of $13.55.
Ceasefire Conditions and Iranian Response
The ceasefire is contingent upon Iran’s agreement to immediately open the Strait of Hormuz. Iran has stated it will allow navigation through the strait “in coordination with the Iranian armed forces.”
President Trump announced the agreement on Truth Social, stating he agreed to suspend bombing and attacks on Iran for two weeks based on conversations with Pakistani Prime Minister Shehbaz Sharif and Army Chief Asim Munir.
Negotiations and Potential for Long-Term Peace
Trump indicated the ceasefire would be reciprocal and motivated by “significant progress in talks for long-term PEACE” with Iran. He stated a 10-point proposal from Iran provides a practical basis for negotiations, with almost all past disputes resolved.
Market Reaction and Analyst Commentary
Analysts note that refined product prices are also falling following the ceasefire agreement, with European diesel contracts down as much as 23% – the largest drop in over four years.
Jason Schenker, chief economist at Prestige Economics LLC, suggested that oil prices would likely remain above $80 per barrel, but warned that any breakdown in US-Iran ceasefire talks could quickly push prices back above $100.
Josh Gilbert, an analyst at eToro, stated that the market had been lacking positive news, leading to an immediate sell-off of oil as markets price in the prospect of the Strait of Hormuz reopening.
Despite Wednesday’s significant declines, oil prices remain more than 40% higher than before the start of the US-Israel-Iran conflict at the end of February.