Global crude oil prices dropped sharply on Wednesday after the United States and Iran agreed to a two-week pause in hostilities tied to conditions on the reopening of the Strait of Hormuz, easing immediate fears of supply disruption and triggering one of the steepest market declines in recent years.
U.S. President Donald Trump confirmed the temporary suspension of attacks on Iran, saying it would last two weeks to allow negotiations to be finalized, provided Tehran guarantees safe passage through the Strait of Hormuz, a key route for global oil shipments.
The announcement came just before an 8 p.m. ET deadline set by Trump for Iran to reopen the Strait, a vital waterway through which about 20 percent of the world’s oil supply passes. The development quickly shifted market sentiment, reversing recent price gains driven by fears of disruption.
Oil benchmarks reacted immediately. West Texas Intermediate fell by more than 15% to $96.6 per barrel, while Brent dropped over 14% to $93.9 per barrel. The fall marked the biggest single-day decline in years and the worst performance for WTI since April 27, 2020.
The tensions had escalated in recent days after warnings from Trump that military action could follow if Iran failed to comply. In earlier remarks shared on social media, he said, “A whole civilization will die tonight, never to be brought back again. I don’t want that to happen, but it probably will.” He also warned of possible strikes, stating he could “bomb every bridge and power plant in Iran” if demands were ignored.
Following diplomatic exchanges, Trump said the agreement was reached after Iran submitted a 10-point proposal that he described as a workable foundation for talks. He noted that progress had been made on most areas of disagreement and that the pause would allow both sides to complete a formal agreement.
He added on social media, “Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two-week period will allow the Agreement to be finalized and consummated.”
Iran responded through Foreign Minister Seyed Abbas Araghchi, who confirmed that Tehran would permit safe passage through the Strait during the ceasefire period. He said this would be done “via coordination with Iran’s Armed Forces and with due consideration to technical limitations.”
He further stated, “If attacks against Iran are halted, our Powerful Armed Forces will cease their defensive operations.”
The temporary agreement followed diplomatic engagement involving Pakistan Prime Minister Shehbaz Sharif, who reportedly urged a delay in the deadline to allow more time for negotiations. He also encouraged Iran to reopen the Strait as a goodwill step to support dialogue.
Oil markets had been on edge in recent weeks due to rising tensions linked to attacks on commercial shipping, which disrupted crude flows and pushed prices higher. The Strait of Hormuz, as a critical transit point, has remained at the center of concerns over global energy security.
Analysts say the ceasefire has provided short-term relief but warn that risks remain. Some point out that the situation could lead to continued uncertainty in the market, especially if tensions rise again after the two-week period ends.
Market observers also note that earlier developments had driven crude prices to sharp gains, with both WTI and Brent rising by more than 50 percent in March amid fears of prolonged disruption. The latest drop reflects how quickly sentiment can shift based on geopolitical signals.
Even with the temporary pause, experts expect a risk premium to remain in oil pricing due to ongoing uncertainty. Fuel products such as diesel, jet fuel, and gasoline are also projected to face upward pressure in the coming days as markets adjust to the evolving situation.
