By Enyichukwu Enemanna
Oil price on Wednesday tumbled below $100 per barrel following an announcement by the U.S. President, Donald Trump that Washington has agreed to a two-week ceasefire with Iran, subject to an immediate and safe reopening of the Strait of Hormuz.
Brent crude futures were down by as much as $14.83, representing about 13.57%, standing at $94.44 a barrel by 11:02 a.m. ET (1502 GMT). WTI futures slid by $17.92, or 15.87%, to $95.03.
According to UBS analyst Giovanni Staunovo, investors are likely focusing on de-escalation and are selling oil as a result.
Trump’s u-turn came shortly before his deadline for Iran to open the Strait of Hormuz or face widespread attacks on its civilian infrastructure.
About 20% of the world’s daily oil supply passes through the narrow waterway.
“This will be a double sided CEASEFIRE!” Trump wrote on social media after posting earlier on Tuesday that “a whole civilization will die tonight” if his demands were not met.
Shipping sources said the Iranian navy threatened ships attempting to pass through the Strait of Hormuz without Tehran’s permission with destruction on Wednesday and that transit through the waterway remained shut.
Iran had said it would halt its attacks if strikes against it stopped and that safe transit through the Strait of Hormuz would be possible for two weeks in coordination with Iranian armed forces, according to a statement by Foreign Minister Abbas Araqchi.
Iran could open the strait in a limited and controlled way on Thursday or Friday ahead of a meeting between U.S. and Iranian officials in Pakistan, a senior Iranian official involved in the talks told Reuters on Wednesday.
“Safe passage for ships in the Strait of Hormuz will be a key point in the talks… oil is set to remain meaningfully above pre-war levels until there is clear evidence of shipping normalization,” Raymond James analyst at Pavel Molchanov said.
Shippers were still seeking clarity on the logistics, while refiners inquired about new crude loadings on Wednesday, in response to the ceasefire deal.
Trump said the U.S. had received a 10-point proposal from Iran, which he called a workable basis to negotiate, and that the parties were a long way towards reaching a definitive agreement for long-term peace.
He said on Wednesday that the United States will work closely with Iran and will be talking about tariff and sanctions relief with Tehran.
