Oil Plunges on Ceasefire Deal

Oil and gas prices both plummeted after the US and Iran agreed to a two-week ceasefire deal aimed at halting the American-Israeli military campaign, with the White House announcing the US would hold direct talks with Iran in a bid to end the six-week conflict.

Brent fell 13% to settle under $95 a barrel, with West Texas Intermediate futures closing just behind. European natural gas futures also ended lower after posting their biggest intraday decline in more than two years, shedding as much as 20%.

Traders are speculating on how quickly transit through the key Strait of Hormuz can resume. It is the route for about a fifth of global oil and liquefied natural gas supplies, and the near-halt of traffic has pushed prices for real-world crude to a record. Faced with an unprecedented disruption to flows, the world is rapidly running down supply buffers to offset the loss.

For now, Hormuz remains largely blocked. Prices clawed back some losses on Wednesday after Iran's semi-official Fars news agency said that the passage of oil tankers through the strait has been halted following Israeli attacks on Lebanon.

Even as hopes for an end to the war have been raised, sporadic fighting continued throughout the region, including the Israeli moves in Lebanon and Iranian strikes on Gulf states. There is disagreement between Tehran and the American-Israeli side over whether the ceasefire covers Lebanon. Iranian Parliament Speaker Mohammad-Bagher Ghalibaf said in a statement posted on X that three clauses of the ceasefire proposal have been violated so far.

While the ceasefire is welcome, "it is highly unlikely that trade into the Gulf will simply resume," said Neil Roberts, head of marine and aviation at insurance organization the Lloyd's Market Association. "The region remains at heightened risk with none of the underlying tensions resolved."

Key data from the US Energy Information Administration published Wednesday showed how quickly stockpiles are being drawn down across all major oil-product categories. Distillate stocks on the US Gulf Coast are at their lowest since September 2024, while domestic gasoline inventories shrunk to the smallest in almost 16 years. The world has been looking to US supplies to offset disruptions to Middle Eastern flows.

"It would take something truly tremendous for us to get back down below $80 a barrel," Jason Schenker, president and chief economist at Prestige Economics LLC, told Bloomberg Television. "But almost anything going wrong in these ceasefire talks could very quickly put us back above $100."

Investors are balancing this outlook with signs that negotiations are moving in a positive direction. The White House said Vice President JD Vance would lead the US delegation to Islamabad. The first round of talks is set to take place Saturday morning local time.

President Donald Trump said Wednesday that the US is discussing sanctions relief with Tehran, according to a post on his Truth Social network. Washington waived some restrictions on Iranian oil during the conflict in a bid to keep markets well-supplied. A comprehensive package of relief could bring more barrels to Western buyers over time. Trump also said earlier that the US would help ease the buildup of traffic in Hormuz.

Slow Return

Even once Hormuz transit picks up, the return of energy supplies will not be instant. Output has been reduced at oil and gas fields, while refineries have curtailed production or shut down. Some of those will take weeks or possibly longer to return to normal.

US government estimates show that more than 9 million barrels a day of oil production from key Middle Eastern countries was expected to be shut in during April. Even if the war draws to a close by the end of this month, output may not reach pre-conflict levels until late 2026, the EIA said in an outlook published Tuesday.

In Qatar, which took its giant Ras Laffan LNG complex offline in early March following Iranian attacks, engineers are mobilizing in an effort to restart operations, according to people with knowledge of the matter. Some production could resume over the coming days, though it is not clear how quickly it could ramp up and any return to significant output would require ships to be able to pass through Hormuz.

The current plan for Hormuz includes allowing Iran and Oman to charge fees on ships passing through, the Associated Press reported, though Oman itself said maritime agreements prevent it from enforcing tolls.

"The larger issue is strategic: normalising tolls monetises coercion, embeds leverage directly into global energy flows, and encourages repeat brinkmanship," Societe Generale SA analysts including Ben Hoff wrote in a note. "Far from stabilising the Strait, a toll regime risks institutionalising insecurity."

The plunge in European gas came shortly after many investors in the fuel had amassed near-record net-bullish positions, leaving the market poised for a slump. In oil, futures tied to Abu Dhabi's flagship Murban crude dropped as much as 20%, the most since the contract's launch in 2021.

And meanwhile, trend-following commodity trading advisers shifted to 91% long in WTI and Brent, marking the first time since early March they have been anything other than fully long, according to data from Kpler's Bridgeton Research group. The algorithmic traders, known for accelerating price swings, had previously widened their stop-out levels to lock in gains while sitting out extreme volatility, signaling a re-entry that could heighten near-term market swings.

"What is being observed, both in reporting and in physical premiums, is not a full reopening of the Strait of Hormuz, but rather a formalization of existing conditions, where passage remains contingent on coordination with Iran's armed forces and subject to technical constraints," said Janiv Shah, a vice president at Rystad Energy.

Physical traders remain cautious, waiting for clearer signs the ceasefire will hold before seeking cargoes from the Gulf. Meanwhile, shipowners said they needed to see vessels safely exit the region before sending in tankers. At present, there are more than 800 vessels that have been trapped by the war.

"The ceasefire may create transit opportunities, but it does not yet provide full maritime certainty and we need to understand all potential conditions attached," said A.P. Moller-Maersk A/S, the world's second-largest container line.

Trump's ceasefire announcement Tuesday came about 90 minutes before his deadline for Iran to reopen the strait or face a massive bombardment. The lead-up was marked by military escalation and bellicose threats from the US president, including a post saying "a whole civilization will die tonight."

"This was a market that had been starved of good news," said Josh Gilbert, an analyst at eToro Ltd. "It goes to show how much geopolitical risk was baked into crude, and how quickly it can unwind when there is a credible path to de-escalation."

Oil Prices

• West Texas Intermediate for May delivery fell 14.37% to $96.72 a barrel at 3:27 p.m. in New York; Prices settled at $94.41 on Wednesday
• Brent for June settlement dropped 11.17% to $97.06 a barrel; The settlement on Wednesday was $94.75
  • Prices remain more than 25% higher than they were at the end of February