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Crude oil prices slid on Wednesday after U.S. President Donald Trump announced a two-week postponement of strikes on Iranian civilian infrastructure, framing it as a “double-sided ceasefire” tied to Iran reopening the Strait of Hormuz. WTI crude oil futures fell more than 15 per cent to below $93 per barrel while Brent crude declined toward $91.
The drop followed U.S. President Donald Trump’s announcement of a two-week delay in strikes on Iranian civilian infrastructure. He called it a “double-sided ceasefire” linked to Iran reopening the Strait of Hormuz.
Trump stated the U.S. received a 10-point proposal from Iran as a basis for talks. Iran agreed to temporarily reopen the strait if hostilities pause, with coordination by its forces. Israel has accepted the plan. The strait handles 20% of global oil flows. A drone strike also hit Saudi Arabia’s East-West pipeline, a key Red Sea route.
War’s Impact on Oil Prices
The six-week conflict caused these price shifts: Early Rise: Hormuz restrictions lifted WTI from $68 to $95 per barrel, adding a $10-15 risk premium and cutting 2-3 million bpd. Mid-Conflict: Saudi pipeline use to 5 million bpd offset some losses; Wednesday’s strike reduced output by 1.5 million bpd briefly. Current Drop: Ceasefire news removed the premium, causing the 15 per cent decline.
WTI crude oil futures plunged more than 15 per cent to below $93 per barrel on Wednesday, while Brent crude tumbled toward $91,
The dramatic reversal capped weeks of volatility triggered by escalating Middle East tensions. Trump revealed that the U.S. had received a 10-point proposal from Tehran, which he described as a “workable basis for negotiations.” The delay, he said, provides time to finalise a potential agreement. Iran has conditionally agreed to temporarily reopen the strait—through which roughly 20 per cent of global oil supply flows—if hostilities pause, with transit coordinated by its armed forces. Israel has reportedly accepted the arrangement, signaling a fragile de-escalation.
“This is a pragmatic step to avoid broader catastrophe while we test Iran’s sincerity,”
Trump stated in a White House address. “The Strait must flow again, or all options remain on the table.” Markets reacted swiftly, unwinding a wartime risk premium that had driven prices up nearly 40 per cent since the conflict’s onset last month. War’s Toll on Oil Prices: A Rollercoaster of Disruptions
The Iran-Israel-U.S. proxy war, now in its sixth week, has reshaped global energy markets through a cascade of supply shocks and fear-driven speculation. Here’s how it unfolded:
Initial Surge (Weeks 1-2): Iran’s near-closure of the Strait of Hormuz in retaliation for Israeli strikes on its nuclear facilities spiked prices. WTI jumped from $68 to $95 per barrel, adding a $10-15 “geopolitical risk premium” as traders priced in 2-3 million barrels per day (bpd) of lost exports. Brent hit $98, its highest since 2022, fueling inflation fears in oil-importing nations like India and Europe.
Saudi Bypass Strain (Weeks 3-4): As Gulf shipping halted, Saudi Arabia ramped up its East-West pipeline to 5 million bpd, diverting flows to the Red Sea. This mitigated some losses but exposed vulnerabilities—exacerbated by Wednesday’s drone strike on the pipeline, which Saudi state media confirmed caused a 24-hour shutdown, shaving another 1.5 million bpd offline temporarily.
Speculative Peak and Unwind (Week 5+): Open interest in crude futures hit record highs, with hedge funds long on oil amid slowdown recession risks. The ceasefire news triggered a $20-per-barrel drop in hours, as the premium evaporated. Analysts at JPMorgan estimate the war inflated prices by 25-30% overall, costing global consumers $150 billion in higher fuel costs.
The war’s price swings echo history: Iran’s 1979 revolution doubled crude to $40/bbl (inflation-adjusted $150 today), while Saudi’s 2019 Abqaiq drone attack spiked Brent 15% in a day before fading. This time, added U.S. sanctions on Iranian exports (down 1 million bpd) and OPEC+ cuts prolonged the rally.
Broader Ripples and Outlook
The East-West pipeline attack, claimed by Houthi rebels backed by Iran, underscores ongoing risks. Saudi Aramco reported minor damage but vowed swift repairs, while U.S. Navy escorts bolstered Red Sea security.
Energy Secretary Jennifer Granholm warned of “persistent volatility,” urging allies to tap strategic reserves. In Nigeria, where oil accounts for 90% of exports, the price slide offers relief from naira pressures but threatens 2026 budgets amid Dangote Refinery ramp-ups.
Analysts remain cautious. “A true Hormuz reopening could stabilize prices at $80-85, but one drone changes everything,” said Goldman Sachs’ Daan Struyven. Futures markets now price a 60% chance of full de-escalation by month-end, but inflation hawks eye persistent upside risks.
As talks progress, the world watches whether this ceasefire holds—or reignites the oil storm. Would you like me to adjust the tone (e.g., more neutral or urgent), add Nigeria-specific impacts, or expand on any section like OPEC reactions?
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