HOUSTON: Oil prices plunged by about 13% on Friday after Iran’s foreign minister said passage for all commercial vessels through the Strait of Hormuz was open for the remaining ceasefire period and U.S. President Donald Trump said Iran has agreed to never close the strait again.
Brent crude futures fell $12.87, or 12.95%, to $86.52 a barrel by 10:50 a.m. EDT (1450 GMT), after falling to a session low of $86.09. U.S. West Texas Intermediate crude futures were down $13.50, or 14.26%, at $81.19 a barrel, after touching $80.56.
Both contracts were trading at their lowest since March 10, and set for their largest daily declines since April 8.
Iranian Foreign Minister Abbas Araqchi said the Strait of Hormuz was open following the agreement of a ceasefire in Lebanon.
“Comments from Iran’s foreign minister indicate a de-escalation as long as the ceasefire is in place, now we need to see if the number of tankers crossing the Strait increases substantially,” UBS analyst Giovanni Staunovo said.
Progress in negotiations
The U.S. and Iran have made progress in the negotiations over a three-page memorandum of understanding to end the war, according to an Axios reporter on X.
Prices had already fallen earlier in the session as possible further talks between the United States and Iran over the weekend and a 10-day ceasefire between Lebanon and Israel raised investors’ hopes the war in the Middle East could be nearing an end.
Addressing a sticking point in talks, Trump said Tehran had offered to not possess nuclear weapons for more than 20 years.
“We’re going to see what happens. But I think we’re very close to making a deal with Iran,” Trump told reporters outside the White House on Thursday.
Trump also said on Friday that the United States has banned Israel from further bombing in Lebanon, using an a harsher tone than usual with the longtime U.S. ally.
Shortly after the announcement that the strait was open, a U.S. official told Reuters that a military blockade of Iran involving more than 10,000 personnel remains in effect.
While the opening up of the strait was a step in the right direction, the European market would remain tight for a while, analyst Ole Hvalbye at SEB Research said, since it takes roughly 21 days for ships to move from the Gulf to Rotterdam, the main crude port in the region.
Traffic could be halted once again in the strait, if an agreement about Iran’s nuclear ambitions and lifting the U.S. sanctions remains elusive, said Tamas Varga, an analyst at PVM Oil Associates.
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