Oil prices fell sharply on Wednesday after U.S. President Donald Trump agreed to a two-week ceasefire with Iran and said Washington would help address shipping congestion in the Strait of Hormuz.
Brent crude futures — the international oil benchmark — dropped 13.6% to $94.40 per barrel by 05:15 ET (09:15 GMT). U.S. West Texas Intermediate crude futures fell even more steeply, declining 15.8% to $95.20 per barrel.
Trump said Tuesday evening that he had agreed to pause military operations against Iran for two weeks, just hours before an 8:00 p.m. Eastern deadline requiring Tehran to reopen the Strait of Hormuz or risk severe strikes on vital infrastructure. Earlier, Trump had warned that the United States would destroy Iran’s “civilization” if his demands were not met.
The president said the United States had already accomplished its primary military objectives and added that Iran had put forward a multi-point proposal that could serve as the foundation for a broader agreement.
Iran also indicated a conditional readiness to reduce tensions, saying safe passage through the Strait would be possible during the ceasefire period provided hostilities end and vessels coordinate their movements with Iranian authorities.
The breakthrough followed urgent diplomatic negotiations, with Pakistan playing a significant mediating role in encouraging both sides to pull back from the edge of escalation.
Markets had been closely monitoring Trump’s deadline, as many expected it could trigger a major intensification of the conflict. In the hours leading up to the cutoff, oil prices had surged to multi-month highs amid fears that potential U.S. strikes might severely disrupt Middle East energy supply routes.
Earlier in the day, Trump had warned that failure by Iran to comply could bring consequences where “a whole civilization could die.”
Trump pledges help to ease Hormuz shipping congestion
In a social media post on Wednesday, Trump said the United States would assist in reducing the backlog of tanker traffic in the Strait of Hormuz. He also expressed confidence that the ceasefire would hold, describing the moment as “a big day for world peace.”
Tanker movements through the strait — which carries about 20% of the world’s oil supply — have effectively been halted for weeks due to the threat of Iranian attacks on ships attempting to pass through the waterway. Media reports also indicate that Iran has been developing a framework to charge fees for certain vessels crossing the strait.
Concerns have grown that a prolonged closure of the passage could disrupt critical global energy supplies. Analysts say investors will be closely watching whether oil shipments begin to normalize, as reports suggest some vessels remain uncertain about whether the route is safe.
“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.
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