Oil prices fall sharply following the announcement of a conditional truce between Iran and the United States. The deal includes a two-week halt in hostilities and reopening of the Strait of Hormuz, calming global markets.
Brent crude, the international benchmark, dropped about 13 percent to $94.80 per barrel. Meanwhile, U.S. crude fell more than 15 percent, reaching $95.75 per barrel. Despite this decline, oil prices remain higher than pre-conflict levels in late February, when crude traded near $70 per barrel. The surge in energy prices earlier this year followed major disruptions in Middle Eastern oil and gas supplies. Iran had threatened attacks on vessels passing through the Strait of Hormuz in retaliation for U.S. and Israeli airstrikes. The conditional truce now reduces these immediate threats and reassures markets.
Asian stock indices responded positively on Wednesday, reflecting the easing tensions. Investors reacted to the combined effect of the truce and the potential stabilization of global energy supplies. Donald Trump confirmed the conditional agreement via social media, stating he accepted a temporary halt to attacks if Iran ensures full and secure passage through the strait. Trump had previously set a firm deadline, warning of severe consequences if no deal was reached.
Iranian Foreign Minister Abbas Araqchi emphasized that Tehran would agree to a truce only if attacks against Iran ceased. He also confirmed that safe navigation through the Strait of Hormuz would follow. Analysts from AlphaSense noted that avoiding a sharp escalation benefits global markets. Saul Kawunik, a financial services analyst at MST Markey, added that the truce could allow more oil tankers to transit the strait in the coming weeks. However, he cautioned that Middle Eastern energy production might not immediately return to normal. Infrastructure damage from the conflict could delay full recovery for months.
Countries heavily reliant on imported energy, such as India, Malaysia, and the Philippines, have already negotiated safe passages for their vessels. Even with the truce, production in the region remains vulnerable. Companies face repair costs exceeding $25 billion to restore damaged energy facilities. The conditional truce provides relief, particularly for Asian economies. Ichiro Kotani from the Japan Institute of Energy Economics stated that stable oil prices are critical for developing nations without sufficient domestic reserves. He noted that sustained calm could gradually restore market stability.
Oil prices fall amid renewed hope for regional stability, though long-term recovery depends on continued compliance and infrastructure restoration. Markets will watch developments closely as the two-week truce progresses.