On Friday, oil prices experienced a sharp decline following Iran's announcement that the Strait of Hormuz is fully open to all commercial vessels for the duration of the ceasefire between Israel and Lebanon, as stated by Iranian Foreign Minister Abbas Araghchi [1][2][3]. West Texas Intermediate (WTI) crude dropped by 9.12% during the day, trading near $81.50 and touching an intraday low of $80.30, its weakest level since March 10 [1]. Brent crude also fell more than 10% to around $89 a barrel [2]. Fox Business reported WTI prices fell over 10% to under $85 a barrel, while Brent crude dropped to around $89 [2]. The ceasefire began on Thursday, and President Donald Trump confirmed that the Strait is open for business, but the naval blockade remains in effect for Iran until ongoing negotiations are complete [1][2].
Previously, oil prices surged above $100 a barrel due to the closure of the Strait amid conflict, with WTI peaking at nearly $113 a barrel on April 6 and Brent at more than $119 a barrel on March 30 [2]. The blockade had disrupted shipping traffic and caused an oil price shock, with ING estimating that roughly 13 million barrels per day of oil supply had been disrupted [1]. The Strait of Hormuz is a vital energy corridor, handling about 20% of the world's oil supply and a significant share of liquefied natural gas shipments [2][3].
The reopening has prompted traders to unwind risk premiums embedded in oil prices, signaling a potential normalization of supply flows [1][3]. Market analysts are closely monitoring price reactions, noting that the easing of supply fears may provide relief to oil prices, which had been under upward pressure [3]. Traders are watching key support levels for Brent and WTI crude, with attention shifting to the durability of the ceasefire and prospects for a lasting agreement between Washington and Tehran [1][3].
According to President Trump, the process of negotiations with Iran is expected to proceed quickly, as most points are already negotiated [1]. However, the naval blockade remains in effect for Iran until the transaction is fully complete [1][2]. The situation remains fluid, and market sentiment will depend on ongoing developments in the region [3].
CONCLUSION
The reopening of the Strait of Hormuz has triggered a dramatic sell-off in oil prices, easing supply fears and reversing the recent rally driven by geopolitical tensions. While immediate concerns about oil shortages have subsided, market participants remain focused on the durability of the ceasefire and ongoing negotiations between the US and Iran. The market impact is high, and sentiment is negative as traders rapidly reposition in response to the normalization of supply flows.