Oil prices plummeted on Wednesday, recording their largest single-day drop since April 2020, following the announcement of a two-week ceasefire between the United States and Iran. The agreement aims to secure the reopening of the Strait of Hormuz, a critical maritime chokepoint for global energy supplies.
West Texas Intermediate (WTI) collapsed more than 16% to close at $94.41 per barrel. Brent crude followed suit, shedding approximately 13% to settle at $94.75. The sell-off marks a rapid reversal from March, when prices surged toward $120 per barrel following the closure of the strait.
Global markets reacted to the news with a surge in risk appetite. The Mexican peso strengthened 1.50% against the dollar, closing at 17.44 units, as the greenback weakened and inflationary pressure expectations eased. The dollar index (DXY) fell 0.82% as investors shifted capital away from safe-haven assets.
Fragile peace and lingering risks
Despite the market rally, analysts remain cautious about the longevity of the truce. Monex signaled that the agreement showed signs of instability within hours of its inception. The Iranian parliament has already labeled the deal “unreasonable,” citing alleged American violations of the terms.
Reports of continued military friction further complicate the outlook. While the ceasefire is in effect, the Israeli military has continued its bombardment of Lebanon—an area U.S. President Donald Trump indicated is not covered by the current agreement. Meanwhile, Pakistan reported multiple claims of ceasefire violations involving ongoing incursions.
John Plassard, an analyst at Cite Gestion, noted that markets are not pricing in an end to the conflict, but rather a window for diplomacy. "In two weeks, either this opportunity leads to a lasting agreement, or it will only postpone and aggravate the energy crisis that everyone fears," Plassard said.
Logistical hurdles remain at the core of the energy sector’s instability. Tanker traffic through the Strait of Hormuz has yet to normalize, with transit levels remaining tightly restricted. Even with the political agreement, the physical movement of oil remains hampered by the lingering threat of renewed hostilities.
