Crude Falls to March Lows as Strait of Hormuz Reopens

Global oil prices plunged sharply on Friday, with both benchmark crude contracts falling over 10%, after signs of easing geopolitical tensions in the Middle East and assurances on the reopening of the Strait of Hormuz, according to Reuters.

Brent crude futures dropped $10.42, or 10.48%, to $88.97 per barrel, after hitting an intraday low of $86.09. U.S. West Texas Intermediate (WTI) crude fell $11.48, or 12.12%, to $83.21, touching a low of $80.56 during the session. Both benchmarks were trading at their lowest levels since March 10 and were set for their sharpest daily decline since April 8.

The sharp fall came after Iran's Foreign Minister Abbas Araqchi said that the Strait of Hormuz would remain open for commercial shipping during the ongoing ceasefire period.

U.S. President Donald Trump also said Iran had agreed not to shut the critical oil transit route, which handles a significant share of global crude shipments.

Easing Tensions Pull Down Risk Premium

The reopening of the Strait of Hormuz, a key chokepoint for global oil trade, led to a rapid unwinding of the risk premium that had built up in recent weeks. Analysts at Gelber & Associates said crude prices are now shifting back towards reflecting normal supply flows rather than disruption risks.

Markets were already under pressure earlier in the session as reports of renewed diplomatic engagement between the U.S. and Iran, along with a 10-day ceasefire between Lebanon and Israel, boosted hopes of de-escalation in the region.

Trump indicated that negotiations with Iran were progressing, including discussions around a potential agreement to curb Tehran’s nuclear ambitions. "We're very close to making a deal," he said, according to Reuters.

Uncertainty Remains Despite Progress

Despite the positive signals, uncertainty persists. A U.S. official told Reuters that a military blockade involving over 10,000 personnel remains in place, suggesting tensions have not fully subsided.

Analysts cautioned that while the reopening of the Strait is a positive development, supply dynamics may take time to normalise. It could take up to three weeks for shipments from the Gulf to reach key European markets such as Rotterdam.

Further risks remain tied to the outcome of negotiations and sanctions-related developments. Iran's Parliament Speaker Mohammed Bagher Ghalibaf warned that the Strait could be closed again if the U.S. continues its naval blockade.

The sharp correction in oil prices reflects how quickly markets are reacting to geopolitical developments, with investors recalibrating expectations as the risk of supply disruptions appears to ease, at least in the near term.