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Oil prices tumbled to their lowest levels in over a week on Tuesday following U.S. President Donald Trump’s announcement of a ceasefire agreement between Iran and Israel, reducing concerns over supply disruptions in the Middle East—one of the world’s most critical oil-producing regions.
As of 0330 GMT, Brent crude futures were down $2.08 or 2.9%, trading at $69.40 per barrel after briefly plummeting more than 4%, reaching their lowest point since June 11. Similarly, U.S. West Texas Intermediate (WTI) crude dropped $2.03, or 3.0%, to $66.48 per barrel, after earlier diving 6%, marking its weakest level since June 9.
The drop in oil prices comes after Trump announced that Iran and Israel had fully agreed to a ceasefire, bringing a potential end to the 12-day conflict. Trump stated on Monday that the ceasefire would take effect immediately with Iran ceasing hostilities first, followed by Israel after 12 hours. If both sides uphold the peace, the conflict will officially end after 24 hours.
Trump emphasized that this “complete and total” ceasefire aims to end the conflict, which had triggered significant market volatility due to concerns over disruptions in crude supply.
Eased Tensions Signal Potential for Increased Oil Exports
Iran, as OPEC’s third-largest crude producer, stood at the center of market concerns in the wake of the conflict. The ceasefire agreement is expected to ease tensions and potentially pave the way for Iran to ramp up its oil exports, which had been stifled due to the conflict and the heightened risk of further escalation.
The announcement came after oil prices surged in recent days, largely driven by worries of supply disruptions from the Middle East, particularly through the Strait of Hormuz, a narrow shipping route between Iran and Oman that carries roughly 18 to 19 million barrels per day of crude oil and fuels—almost 20% of global oil consumption.
In the previous session, oil contracts had rallied to five-month highs after the U.S. attack on Iran’s nuclear facilities, raising fears of a broader conflict. The involvement of the U.S. in the war focused investor attention on the risk to vital shipping lanes, particularly the Strait of Hormuz.
Price Volatility Likely to Continue Amid Geopolitical Developments
The ceasefire agreement marks a significant de-escalation of tensions in the region, allowing market participants to shift their focus away from potential disruptions. However, concerns over global oil supply remain, and any new developments or shifts in geopolitical dynamics could reignite price volatility, especially if the situation in the Middle East remains fragile.
While the easing of tensions is expected to reduce immediate supply risks, the impact on oil prices may be temporary, with further volatility likely depending on the continuation of peaceful efforts or a potential flare-up in hostilities.
