Oil prices plunge after cease-fire, Hormuz Strait reopening announced
by Paul Godfrey · UPIApril 8 (UPI) -- Global oil prices tumbled after the United States, Israel and Iran agreed to a Pakistan-brokered two-week cease-fire deal that included reopening the Strait of Hormuz to international shipping.
The Brent crude and West Texas Intermediate benchmarks saw double-digit percentage falls following U.S. President Donald Trump's announcement of the breakthrough Tuesday evening, and have since stabilized, changing hands at $95.51 and $96.48 a barrel in early trade on Wednesday.
The market reacted to the prospect that oil tankers trapped in the Persian Gulf would be finally be able to transit the 21-mile-wide body of water between Iran and the UAE and Oman, easing major disruption to global supply caused by Iran's effective blockade of the strait.
However, oil remained well above its $72 a barrel level on Feb. 27, the day before the United States and Israel unleashed their airborne offensive against Iran, amid uncertainty over the mechanism for the resumption of maritime traffic in the strait and the ongoing impact of war damage to energy infrastructure in Gulf countries.
There was also confusion over whether the cease-fire extended to Israel's military offensive against Hezbollah in Lebanon. Pakistan said it did, but Israel said it did not and that its operations would continue.
Financial markets in Europe rallied Wednesday morning, following very significant gains in Asia, where the Nikkei 225 in Tokyo ended up 5.42%, Korea's KOSPI surged almost 7% higher and Hong Kong's Hang Seng Index closed up more than 3%.
Out-of-hours futures transactions in the United States suggested equities would also rally very strongly there when stock exchanges open in a few hours.
Jay Woods, chief market strategist at Freedom Capital Markets in New York, expressed skepticism.
"It wasn't much of a surprise that there was an announced reprieve in the Iranian conflict. The concern now is if this all too familiar 'two-week' timeframe is going to lead to a resolution," said Woods.
A statement from Iran's Supreme National Security Council posted on X by the Iranian foreign minister said safe passage of ships through Hormuz Strait would be possible for the duration of the cease-fire, but that it would have to be "via coordination with Iran's Armed Forces."
In a post on his Truth Social platform in the early hours of Wednesday hailing the cease-fire, Trump pledged U.S. assistance with the logistical problems.
"The United States will be helping with the traffic buildup in the Strait of Hormuz. There will be lots of positive action! Big money will be made. Iran can start the reconstruction process. We'll be loading up with supplies of all kinds, and just 'hangin around' in order to make sure that everything goes well. I feel confident that it will. Just like we are experiencing in the U.S., this could be the Golden Age of the Middle East!!!" Trump wrote.
MST Marquee analyst Saul Kavonic told the BBC that while the number of ships getting through the Hormuz Strait would increase from a trickle, a return to normal levels of energy production in the region was unlikely without a permanent end to the conflict and warning that repairs to damaged infrastructure could take many months.
This week in Washington
Acting Attorney General Todd Blanche speaks during a press conference on the Trump Administration's efforts to combat fraud at the Department of Justice Headquarters on Tuesday. Last week, President Donald Trump fired Attorney General Pam Bondi over her handling of the Epstein files and the lack of investigation into individuals he felt should face criminal charges. Blanche, a former personal lawyer to Trump, will lead the Justice Department temporarily. Photo by Bonnie Cash/UPI | License Photo