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Global oil prices dropped sharply on Friday after Iran signalled that the Strait of Hormuz would remain open to commercial shipping during a temporary ceasefire in the Middle East.
Benchmark crude prices fell by more than 10 per cent, with West Texas Intermediate (WTI) slipping below $85 per barrel, while Brent crude declined to about $89 per barrel.
The decline follows comments by Iran’s Foreign Minister, Abbas Araghchi, who said commercial vessels would be allowed to transit the strait for the duration of a 10-day ceasefire involving Israel and Lebanon.
The truce, which began on Thursday, is reported to include the Iran-backed group Hezbollah.
Oil prices had surged above $100 per barrel in recent weeks amid heightened tensions in the region, with WTI reaching nearly $113 per barrel earlier this month and Brent climbing above $119 in late March.
Analysts say the reopening of the key shipping route has eased supply concerns in global energy markets.
Brian Therien, a senior investment strategist at Edward Jones, noted that oil futures are now trending lower, with projections suggesting prices could fall to the low $70 range by the end of the year. He added that a sustained drop in prices could help reduce inflationary pressures globally.
The Strait of Hormuz, which links the Persian Gulf to the Arabian Sea, is one of the world’s most critical oil transit routes, accounting for roughly one-fifth of global oil and liquefied natural gas shipments.
Shipping through the passage had been disrupted during the conflict due to security concerns, including threats of attacks and the presence of naval mines.
An Iranian official told Reuters that vessels moving through the strait during the ceasefire would be required to use designated safe lanes approved by Iranian authorities, while military ships would not be permitted to pass.
Despite the announcement, some shipping firms remain cautious. German carrier Hapag-Lloyd said it is still reviewing the situation before resuming operations in the area.
Meanwhile, Knut Arild Hareide of the Norwegian Shipowners’ Association welcomed the development but warned that uncertainties remain, particularly regarding maritime safety, operational guidelines, and the potential risks posed by unexploded sea mines.
