Oil Plunges as U.S., Iran Agree to Two-Week Ceasefire; Brent Drops as Much as 17%
Oil prices slumped on Wednesday after the U.S. and Iran agreed to a two-week ceasefire expected to halt the American-Israeli military campaign in exchange for Tehran reopening the Strait of Hormuz. Brent fell as much as 17% intraday, reflecting a rapid unwind of the geopolitical risk premium that had been embedded in crude.
Still, the supply backdrop remains tight. Fresh U.S. Energy Information Administration (EIA) data showed stockpiles are being drawn down quickly across major refined-product categories: Gulf Coast distillate inventories are at their lowest since September 2024, while domestic gasoline stocks slid to their smallest level in nearly 16 years. Global markets have leaned on U.S. barrels to offset disruptions to Middle East flows.
Diplomacy is now the key swing factor. The White House said Vice President JD Vance will lead the U.S. delegation to talks in Islamabad, with a first round scheduled for Saturday morning local time. President Donald Trump also said Washington is discussing sanctions relief with Tehran, after waiving some restrictions on Iranian oil during the conflict to help keep markets supplied. A broader relief package could gradually add Iranian barrels back to Western buyers, though timing and scope remain unclear.
Even if Hormuz transit improves, a swift return of supply is unlikely. Output has been reduced at oil and gas fields, while refineries have curtailed production or shut down, and some facilities could take weeks or longer to normalize. U.S. government estimates indicate more than 9 million barrels a day of production from key Middle East producers was expected to be shut in during April. In Qatar, engineers are working to restart the Ras Laffan LNG complex after it was taken offline in early March, but meaningful recovery would still require safe passage through Hormuz.
Market participants remain cautious on the operational reality of the strait. Several shipping and energy analysts argue the current plan looks less like a “full reopening” and more like a formalization of existing conditions, with passage contingent on coordination with Iran’s armed forces and subject to technical constraints. Physical traders and shipowners said they want clearer evidence the ceasefire will hold before moving cargoes, with more than 800 vessels still trapped by the war.
WTI for May delivery fell sharply into the mid-$90s and Brent for June also dropped significantly, though both benchmarks remain more than 25% above end-February levels. Traders are now watching whether ceasefire terms are implemented on the water, whether vessel traffic normalizes through Hormuz, and how quickly disrupted regional production and refining capacity can return.
Source : Newsmaker.id
