Oil Price Drops Below $100 as Trump Ceasefire Sparks Hope—Hormuz Crisis Still Looms

Oil prices fell sharply on Tuesday after President Donald Trump announced a two-week ceasefire with Iran, raising hopes that global oil supply could stabilise. US crude futures dropped more than 15% in after-hours trading to below $95 a barrel (roughly £70.8 per barrel), while Brent crude, the global benchmark, declined 12.88% to $95.12 (around £71).

The announcement triggered a surge in global stock markets as investors reacted to the potential easing of tensions in the Middle East. Dow futures rose over 900 points, or around 2%, while S&P 500 futures increased 2.1%. Nasdaq futures climbed approximately 2.5%. Asian markets also saw gains, with Japan's Nikkei 225 up 4.9%, South Korea's Kospi rising 5.7%, and Hong Kong's Hang Seng index gaining 2.8% by mid-morning local time.

Details of the Ceasefire Agreement

Trump agreed to the ceasefire less than two hours before his 8 p.m. ET deadline for potential escalation. The agreement was contingent on the reopening of the Strait of Hormuz, a crucial maritime route through which about 20% of the world's oil passes.

Trump posted on Truth Social that the United States had received a '10 point proposal from Iran' and described it as a workable basis for negotiation. Iran, however, emphasised that the ceasefire was temporary, warning that it was not the end of the conflict. A statement broadcast on state-run IRIB noted that all military branches should follow the Supreme Leader's order to cease fire, indicating that operations remain under strict control.

Strait of Hormuz Remains a Source of Uncertainty

Despite the short-term optimism, analysts cautioned that the crisis at the Strait of Hormuz is far from resolved. Bob McNally, founder and president of Rapidan Energy Group, told CNN that 'the market has been eager for good news but it remains to be seen if the Strait of Hormuz opens fully.'

Patrick De Haan, head of petroleum analysis at GasBuddy, added that the ceasefire 'has not really clarified anything when it comes to the Strait.' Iran has also claimed that its military will regulate passage through the strait, a move that would grant Tehran unique economic and geopolitical influence over one of the world's most strategic shipping lanes.

Broader Impact on Oil Supply and Global Markets

The effective closure of the Strait of Hormuz in recent months has caused the largest oil supply shock on record, affecting approximately 12 to 15 million barrels of crude oil per day. Futures and physical oil markets had already signalled major warnings, reflecting the global concern over potential shortages.

Karl Schamotta of Corpay Currency Research noted that beyond immediate market reactions, 'Iran's ruling regime has solidified its political control and demonstrated its capacity to bring global oil and gas markets to their knees.' Investors are closely monitoring whether the ceasefire will lead to a sustained reopening of the strait and long-term stabilisation of crude oil prices.

Market Optimism Meets Caution

The sharp drop in oil prices and the simultaneous rally in stock markets sent a clear signal that investors are hopeful for a resolution to the Middle East conflict. Art Hogan, chief market strategist at B. Riley Financial, said that 'investors would like to get the Strait of Hormuz open and this conflict behind them.'

While markets responded positively, uncertainty remains over the practical effects of the ceasefire on oil shipping and global supply chains. Traders are watching closely to see if Iran's temporary halt to hostilities will translate into consistent passage for tankers and a more stable energy market.