Oil slides after Trump agrees to conditional two-week Iran ceasefire
Oil slides after Trump agrees to conditional two-week Iran ceasefire
Market reaction to US-Iran truce
Oil prices saw a significant drop following President Donald Trump’s decision to impose a two-week pause in military actions against Iran, provided that ships can freely navigate the crucial Strait of Hormuz. The price of Brent crude dropped by approximately 15.9% to $92.30 per barrel, while US-based oil prices fell by nearly 16.5% to $93.80. However, these levels remain above those observed before the conflict began on 28 February.
Strait of Hormuz as focal point
Energy costs have risen sharply due to the disruption of oil and gas exports from the Middle East, triggered by Iran’s threats to attack vessels using the Strait of Hormuz. The country’s retaliation against US and Israeli airstrikes has led to this supply chain challenge. In a Tuesday evening social media post, Trump stated:
“I agree to suspend the bombing and attack of Iran for a period of two weeks… subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz.”
He had set a deadline for 20:00 EDT on Tuesday, warning that “a whole civilisation will die tonight” if no agreement was reached.
Despite his earlier threats, Trump may be cautious about escalating the conflict, as per Xavier Smith of AlphaSense. Smith noted that allowing prices to spike could result in a “self-inflicted economic wound” that few would willingly endure, especially with the pressure of upcoming approval ratings impacting his political standing.
