Oil prices experienced a sharp decline, with Brent and WTI both falling well below $100 per barrel following the announcement of a two-week ceasefire between the U.S. and Iran, which eased fears of supply disruptions in the energy market [1][2]. ING’s commodities team reported that OPEC supply dropped significantly in March, with production down by approximately 7.6 million barrels per day (mb/d) month-on-month to a multi-decade low of 22.1 mb/d, largely due to war-related disruptions and restricted exports through the Strait of Hormuz [1]. Iraq saw the largest output decline, falling by 2.8 mb/d to 1.6 mb/d, while Saudi Arabia’s production decreased by 2.1 mb/d to 8.4 mb/d, and UAE output dropped by 1.4 mb/d to 2.2 mb/d [1]. The reopening of the Strait of Hormuz is expected to allow some lost production to return in the coming weeks, though a full normalization is anticipated to be gradual [1].
U.S. crude oil prices plunged 18% in morning trading Wednesday to around $92 per barrel, while international Brent crude fell 16% to about $90 per barrel. If sustained, this would represent the largest one-day percentage drop in U.S. crude since 2020 [2]. The American Petroleum Institute (API) reported a 3.7 mb build in U.S. crude stocks last week, significantly above expectations for a 0.78 mb increase, adding to the bearish sentiment in oil markets [1]. In contrast, gasoline and distillate inventories fell by 4.0 mb and 0.6 mb, respectively [1].
The ceasefire news triggered a strong rally in equity markets. The S&P 500 surged 2.5% at the opening bell, the Nasdaq Composite jumped 3.1%, the Dow Jones Industrial Average spiked by 1,400 points, and the Russell 2000 rose 3.4% [2]. JPMorgan Chase strategists suggested that the S&P 500 could climb further as market euphoria returns, treating the ceasefire as a de facto end to the conflict despite ongoing economic damage [2]. However, some experts, such as Evercore's Krishna Guha, cautioned that the ceasefire could still collapse and warned of an initial inflation shock [2].
Looking ahead, ING analysts noted that further price direction will depend on whether ongoing talks result in a durable agreement and a sustained normalization of flows through the Strait of Hormuz, with volatility expected to persist during negotiations later in the week [1][2]. GasBuddy analyst Patrick De Haan indicated that while falling energy futures are positive for drivers, retail gas prices may take longer to adjust, potentially easing by one to three cents per day by the weekend [2]. Since the onset of the conflict, unleaded gas prices have risen by more than $1.20 per gallon, from $2.94 to $4.16, and jet fuel prices have nearly doubled since late February [2].
CONCLUSION
The U.S.-Iran ceasefire has led to a dramatic drop in oil prices and a surge in equity markets, reflecting optimism about reduced supply risks and conflict de-escalation. However, both oil and equity analysts caution that uncertainty remains, with future price movements hinging on the durability of the ceasefire and normalization of shipping through the Strait of Hormuz. Market volatility is expected to persist as negotiations continue.