Oil Prices Plunge After Announcement of US-Iran Two Week Ceasefire

Global oil prices plunged dramatically on Wednesday following the announcement of a two-week ceasefire between the United States and Iran, with Brent crude falling 13.11 percent to $94.95 a barrel and West Texas Intermediate dropping 14.21 percent to $96.90 a barrel.

The dramatic de-escalation came after US President Donald Trump announced on Truth Social that he had agreed to "suspend the bombing and attack of Iran for a period of two weeks," subject to Tehran immediately opening the Strait of Hormuz. Iran's Foreign Minister Abbas Araghchi confirmed the agreement, stating that "for a period of two weeks, safe passage through the Strait of Hormuz will be possible via co-ordination with Iran's armed forces."

"We received a 10-point proposal from Iran and believe it is a workable basis on which to negotiate," Trump wrote in his post, adding that the US had "already met and exceeded" all of its military objectives.

The announcement sent shockwaves through global energy markets, which had been bracing for oil prices to potentially surge to $150 or even $200 per barrel amid fears of widespread disruption to global energy supplies. Bloomberg reported that Israel had also agreed to the ceasefire.

The threat of strikes on Iranian energy infrastructure and Tehran's potential retaliatory attacks on Gulf neighbors was creating a perfect storm for a global energy crisis.

The five-week conflict had already caused significant disruption, with analysts estimating that 100 million barrels of oil were not flowing through the strait each week, representing 400 million barrels monthly. Energy consultancy FGE NexantECA had warned that these losses to the market would be "astronomical" without a resolution.

Iran declared victory in getting the US to accept its 10-point plan. The proposal includes a US commitment to non-aggression, continued Iranian control over the strait, acceptance of uranium enrichment, and the lifting of all sanctions.

Iran's Supreme National Security Council added that negotiations are to begin in Islamabad on Friday, warning that "our hands remain upon the trigger, and should the slightest error be committed by the enemy, it shall be met with full force."

The de-escalation comes after months of wild swings in crude prices, which had gained almost 60 percent in a single month—the biggest monthly gain on record—amid headline-driven trading. Markets feared that continued conflict would worsen disruptions to global energy supplies, particularly affecting Asia and Europe, which depend heavily on Gulf oil and gas flows.

Several Asian economies had already begun rationing energy consumption due to rising fuel costs, while the International Monetary Fund and World Bank had warned of serious consequences for the global economy if the war continued for a prolonged period.

The two-week pause provides a crucial window for diplomacy to take place while preventing further escalation. However, markets will remain on edge until a more permanent resolution is achieved.

With the Strait of Hormuz—the chokepoint through which 20 percent of global oil and gas supplies pass, now expected to reopen for safe passage, the immediate threat to global energy security has significantly diminished, though long-term stability remains uncertain as negotiations continue.

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