Oil Prices Tumble as U.S. and Iran Agree on Ceasefire

Crude oil prices took a steep dive Tuesday evening, plummeting below the $100 mark. Why? President Trump announced a two-week ceasefire with Iran, a plan Pakistan pitched.

Biggest Drop Since '91

This marks the biggest single-day drop in oil prices since the Gulf War in 1991. Brent crude futures dropped about 13% to roughly $95 a barrel. Sounds like a steal compared to the $144.42 a barrel recorded recently, right? But hang on. It's still significantly more than the $73 benchmark before the war in February. WTI, the U.S. oil benchmark, also fell to about $96, down by 14%.

Strait of Hormuz: The Real Deal

The ceasefire hinges on Iran reopening the Strait of Hormuz. This waterway is important, handling around a quarter of the world's seaborne oil trade. Its de-facto closure caused the largest oil market disruption in history. Iran's foreign affairs minister released a cryptic statement saying passage is possible with ‘coordination’ with Iran’s Armed Forces, but didn’t offer more.

So, can ship operators trust this truce enough to resume oil and gas shipments? That's the billion-dollar question. Clayton Seigle, an oil analyst, sums it up: confidence in safe passage is the only test that matters now. Will Tehran grant the assurances needed to resume normal operations? Show me the shipping logs.

Physical Market Mayhem

Middle Eastern producers are still cutting output due to blocked export routes. Iraq, Saudi Arabia, Kuwait, UAE, Qatar, and Bahrain shut in 7.5 million barrels per day in March. Expect a higher figure this month. Dated Brent hit a record $144.42 a barrel, shattering the 2008 record set during the financial crisis.

Is the ceasefire a sign of relief at the gas pump? Some say yes, maybe by Friday. But I’ll believe it when I see retention numbers.