Global oil prices dropped sharply after Iran announced that the Strait of Hormuz would be “completely open” to commercial shipping for the duration of the ongoing ceasefire in the 2US-Israel conflict.
Benchmark Brent crude oil fell to around $88 per barrel following the announcement, down from over $98 earlier in the day. The decline reflects renewed market optimism that a critical global energy chokepoint may temporarily resume operations.
The Strait of Hormuz, a narrow maritime passage south of Iran, is one of the world’s most strategically important waterways. Under normal conditions, roughly 20% of global oil and liquefied natural gas shipments pass through the strait, making any disruption highly consequential for global markets.
Iran’s Foreign Minister Abbas Araghchi confirmed that commercial vessels would be allowed safe passage through designated routes for the remainder of the ceasefire period. The statement comes after weeks of heightened tensions, during which Iran effectively restricted access to the waterway following military strikes by the United States and Israel in late February.
Financial markets responded positively. The S&P 500 rose 1.2%, while Europe’s CAC 40 and DAX both gained around 2%. In London, the FTSE 100 closed 0.7% higher, reflecting broader investor confidence.
However, uncertainty remains despite the optimistic signals. Maritime organizations and shipping operators have cautioned that they are still assessing whether the strait is genuinely safe for transit. The Baltic and International Maritime Council (BIMCO) warned that potential mine threats and security risks remain unclear, advising companies to proceed with caution or avoid the area altogether for now.
Similarly, the International Maritime Organization said it is verifying Iran’s announcement to ensure compliance with international navigation standards and safe passage protocols.
The recent conflict had significantly disrupted tanker traffic through the strait, reducing global oil and gas supply and pushing prices sharply higher. Before the escalation, Brent crude traded below $70 per barrel, later surging above $100 and peaking at more than $119 in March. Although prices briefly fell after Iran’s statement, they rebounded to around $92 later on Friday, underscoring ongoing volatility.
Beyond energy markets, the disruption has had broader economic implications. Rising fuel costs have increased petrol and diesel prices globally, while concerns over jet fuel shortages have raised the risk of airline disruptions. In addition, the closure of the strait has impacted global fertiliser supply chains, as approximately one-third of key fertiliser chemicals typically transit through the route—raising fears of higher food prices.
U.S. President Donald Trump welcomed Iran’s announcement, describing it as a positive development and thanking Tehran publicly. He also claimed that Iran had agreed not to use the strait as a geopolitical tool in the future. However, he reiterated that a U.S. naval blockade on Iran would remain in place until a permanent agreement to end hostilities is reached.
Despite official assurances, shipping companies remain cautious. Several operators indicated they would not immediately resume transit through the strait, prioritizing crew safety and risk management. Industry experts also noted that the ceasefire—set to last only a limited number of days—offers a narrow window for tankers to navigate the route, meaning traffic levels may not return to normal in the near term.
Analysts warn that even if a longer-term peace agreement is achieved, global supply chains may take months to stabilize fully. For now, while markets have reacted positively, the gap between political declarations and operational realities continues to shape the outlook for global energy flows.
