Uche Cecil Izuora
Global oil prices crumbled sharply on Friday after Iran signalled that the Strait of Hormuz is now open to commercial shipping during a temporary ceasefire in the Middle East.
Benchmark crude prices fell by more than 10 per cent, with West Texas Intermediate (WTI) slipping below $85 per barrel, while Brent crude declined to about $89 per barrel.
The decline follows comments by Iran’s Foreign Minister, Abbas Araghchi, who said commercial vessels would be allowed to transit the strait for the duration of a 10-day ceasefire involving Israel and Lebanon.
Araqchi on Friday announced that the Strait of Hormuz had been reopened to commercial traffic under a temporary ceasefire arrangement linked to a broader diplomatic push.
In a post on X, Araqchi said the vital shipping corridor would remain accessible to all commercial vessels for the duration of US-brokered truce tied to a ceasefire agreement between Israel and Lebanon.
He added that vessels must adhere to routes designated by Iran’s Ports and Maritime Organisation.
Meanwhile, US President Donald Trump while confirming that Iran had declared the Strait open, emphasised that a US naval blockade targeting vessels bound for Iranian ports remained in force.
“The blockade will continue until our transaction with Iran is 100 per cent complete,” Trump said, suggesting a broader agreement could be imminent, though no timeline has been confirmed.
The truce, which began on Thursday, is reported to include the Iran-backed group Hezbollah.
Oil prices had surged above $100 per barrel in recent weeks amid heightened tensions in the region, with WTI reaching nearly $113 per barrel earlier this month and Brent climbing above $119 in late March.
Analysts say the reopening of the key shipping route has eased supply concerns in global energy markets.
Brian Therien, a senior investment strategist at Edward Jones, noted that oil futures are now trending lower, with projections suggesting prices could fall to the low $70 range by the end of the year. He added that a sustained drop in prices could help reduce inflationary pressures globally.
The Strait of Hormuz, which links the Persian Gulf to the Arabian Sea, is one of the world’s most critical oil transit routes, accounting for roughly one-fifth of global oil and liquefied natural gas shipments.
Shipping through the passage had been disrupted during the conflict due to security concerns, including threats of attacks and the presence of naval mines.
An Iranian official told Reuters that vessels moving through the strait during the ceasefire would be required to use designated safe lanes approved by Iranian authorities, while military ships would not be permitted to pass.
Despite the announcement, some shipping firms remain cautious. German carrier Hapag-Lloyd said it is still reviewing the situation before resuming operations in the area.
Meanwhile, Knut Arild Hareide of the Norwegian Shipowners’ Association welcomed the development but warned that uncertainties remain, particularly regarding maritime safety, operational guidelines, and the potential risks posed by unexploded sea mines.
Earlier, oil markets are hanging on U.S.–Iran talks as hopes for reopening the Strait of Hormuz push prices lower—but failure could trigger shortages and a new price spike.
Oil markets are fixated on this weekend’s second round of US-Iran talks, with hopes rising for a negotiated end to the Strait of Hormuz’s 45-day blockade. Iran’s announcements that navigation through Hormuz is open come after Trump managed to seal a shaky Israel-Lebanon ceasefire, sending ICE Brent below $90 per barrel again. The negotiations in Islamabad will be oil’s ‘make it or break it’ moment, as any failure would amplify the IEA’s warnings of impending fuel shortages and demand collapse.
Araghchi, said that the passage of all commercial vessels through the Strait of Hormuz is ‘completely open for the remaining period of the ceasefire’, only for the IRGC to reiterate that any tankers would still need to coordinate with them.
OPEC crude output plunged by a hefty 7.88 million b/d last month, according to the oil producers’ organization, reaching 20.79 million b/d and marking the steepest monthly drop ever, with Iraq posting the largest production cuts (-2.56 million b/d).
However, Fatih Birol, the head of the International Energy Agency (IEA) has warned that the Middle East would take at least two years to recover and reach pre-war levels of production in both oil and gas, particularly for cash-strapped countries such as Iraq.