Oil Prices Drop Sharply After Iran Declares Strait of Hormuz Open During Ceasefire

Minister Abbas Araghchi announced on Friday that the Strait of Hormuz is "completely open" to all commercial vessels for the remaining period of the ceasefire in Lebanon. The statement was posted on X, aligning the reopening with the truce between Israel and Hezbollah.

Global oil prices fell sharply in response, with Brent crude dropping about 10% to around $88 per barrel and U.S. benchmark WTI declining over 12% to roughly $82 per barrel. U.S. President Donald Trump welcomed the announcement, stating on Truth Social that Iran had declared the strait fully open and ready for passage.

He added that Iran has agreed never to close the Strait of Hormuz again and is removing sea mines from the waterway with U.S. assistance. However, Trump emphasized that the U.S. naval blockade of Iranian ports and ships will remain in full force until a permanent agreement to end the conflict is finalized.

“IRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE. THANK YOU!”

Equity markets reacted positively to the news.

The S&P 500 and Nasdaq each rose more than 1% to new all-time highs in early trading, while the Dow Jones Industrial Average increased by over 1.7%. European indices also climbed, with Paris's Cac and Frankfurt's Dax up more than 2%, and London's FTSE 100 gaining about 0.5%.

Benchmark European diesel futures fell 15% to $997.75 per metric ton following the announcement. The Strait of Hormuz, a narrow waterway linking the Gulf to the Arabian Sea, typically handles a fifth of the world's oil and liquefied natural gas shipments.

The strait has been effectively closed since late February, when the U.S. and Israel launched military strikes in Iran, leading to a spike in oil prices. Brent crude had traded under $70 per barrel before the conflict but peaked above $119 in March.

The closure reduced global oil and gas supplies, raising prices for petrol, diesel, jet fuel, and fertilizers, with a third of the world's key fertilizer chemicals passing through the strait. The reopening follows a 10-day ceasefire in Lebanon, which took effect at midnight, halting fighting between Israel and Hezbollah.

In Beirut, residents celebrated with gunfire and began returning to southern areas, though officials warned against premature returns. The UN peacekeepers reported no airstrikes since the truce began but noted Israeli airspace violations and artillery shelling in southern Lebanon.

Trump stated that most points of a longer-term agreement with Iran are already negotiated and the process should conclude quickly, though no details have been publicly shared. He described the Lebanon truce as a "historic day" and expressed confidence the war with Iran would end soon.

Iran's decision met a key demand from negotiators, who had accused Israel of violating prior deals with strikes on Lebanon.

“The passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire." — Iranian Foreign Minister Abbas Araghchi, Friday (The Bbc). The conflict has resulted in significant casualties, with at least 3,000 deaths in Iran, over 2,100 in Lebanon, 23 in Israel, more than a dozen in Gulf Arab states, and 13 U.S. service members killed. It remains unclear if Hezbollah will accept a deal it did not negotiate, which allows Israeli troops to occupy parts of southern Lebanon. Israel can act in self-defense under the agreement but is barred from offensive operations.”

Markets expect a definitive resolution before month's end, but the speed and volume of restored traffic through the strait are uncertain. An Iran-linked report indicated Tehran could reclose the strait if the U.S. blockade persists. Pakistan's army chief met with Iran's parliament speaker to push for an extension of the Lebanon ceasefire.

Bitcoin rose past $76,000 amid the oil price drop and reduced tensions. Europe's gas futures prices retreated to their lowest since the attacks on Iran, reflecting greater confidence in supply restoration from Qatar and the United Arab Emirates.