Oil prices plunged on Friday after Iran declared the Strait of Hormuz “completely open” for shipping during a ceasefire with Israel and Lebanon, easing fears of prolonged supply disruptions from one of the world’s most critical energy chokepoints.
Iranian Foreign Minister Seyed Abbas Araghchi said on X that commercial vessels would be allowed to pass through the strait under a “coordinated route” supervised by Iranian maritime authorities. His remarks followed comments from U.S. President Donald Trump, who said the Iran conflict that began on February 28 “should be ending pretty soon.”
Brent crude futures for June delivery fell about 9% to settle at $90.38 a barrel, while U.S. West Texas Intermediate (WTI) for May delivery dropped nearly 12% to close at $83.85.
Oil prices briefly extended losses after Araghchi’s announcement, with WTI sliding more than 12% to near $82 per barrel and Brent falling around 10% to roughly $88, before stabilising later in the session.
Trump welcomed the development in a Truth Social post, thanking Iran for reopening the waterway, but added that a U.S. naval blockade of Iranian ports would remain in “FULL FORCE” until a broader agreement is reached.
The Strait of Hormuz, which handles about one-fifth of global oil flows, had faced heightened risks after weeks of escalating tensions linked to the Israel-Lebanon conflict and broader regional hostilities involving Iran-backed groups.
Israel and Lebanon agreed on Thursday to a 10-day ceasefire, easing immediate geopolitical pressure. The truce followed weeks of Israeli strikes targeting Hezbollah positions in Lebanon, complicating already fragile diplomatic efforts between Washington and Tehran.
Trump also said Israeli Prime Minister Benjamin Netanyahu and Lebanese President Joseph Aoun would be invited to the White House for what he described as the first meaningful talks between the two countries in decades.
The sharp decline in oil prices quickly rippled through financial markets, with traders revising expectations for Federal Reserve policy. Futures tied to U.S. interest rates shifted to price in potential rate cuts by late 2026, compared with earlier expectations of prolonged policy restraint.
Analysts said the reopening of the strait reduced immediate supply shock risks, but warned that markets remain highly sensitive to any reversal in the fragile ceasefire.
Neil Dutta, head of economic research at Renaissance Macro Research, said easing energy pressures could allow the Fed to focus more on disinflation trends rather than stagflation risks.
Despite the relief rally, market participants cautioned that any renewed escalation in the Middle East could quickly reverse recent gains, keeping energy markets volatile in the weeks ahead.