Oil prices experienced a significant drop of approximately nine percent on Friday following Iran’s announcement that the Strait of Hormuz was accessible to all commercial vessels during the remaining ceasefire period. President Donald Trump stated that Iran had committed to keeping the strait open permanently.
Brent crude futures concluded the day with a $9.01 decline, representing a 9.07 percent decrease to $90.38 per barrel, after hitting a low of $86.09. Meanwhile, U.S. West Texas Intermediate crude futures settled down by $10.48, or 11.45 percent, at $83.85 per barrel, with a session low of $80.56. This marked the largest daily drop for both contracts since April 8.
A senior Iranian official informed Reuters that all ships could transit through the Strait of Hormuz, contingent on coordination with Iran’s Islamic Revolutionary Guard Corps. The official also mentioned that the unfreezing of Iranian funds was part of the agreement.
Analysts from Gelber & Associates noted that the market was quickly reducing the risk premium accumulated over the past two weeks, shifting focus towards normalizing crude flow rather than disruption risks. Ship tracking data revealed approximately 20 vessels moving from the Gulf through the Strait of Hormuz.
In negotiations between the U.S. and Iran, progress was reported on a three-page memorandum of understanding to end the conflict. Trump mentioned in an interview that the U.S. would gradually retrieve enriched uranium from Iran. The possibility of further talks over the weekend and a ceasefire between Lebanon and Israel contributed to a decline in prices, fostering hopes for a resolution in the Middle East conflict.
Trump expressed optimism about reaching a deal with Iran, highlighting Iran’s commitment to refrain from possessing nuclear weapons for over 20 years. He also mentioned that the U.S. had prohibited Israel from conducting further bombings in Lebanon. Despite the strait being open, a U.S. official disclosed that a military blockade involving over 10,000 personnel against Iran was still in place.
While the strait’s reopening was a positive step, Ole Hvalbye, an analyst at SEB Research, anticipated a tight European market due to the 21-day journey from the Gulf to Rotterdam, a major crude port. Analyst Tamas Varga from PVM Oil Associates warned of potential disruptions if an agreement on Iran’s nuclear program and U.S. sanctions removal remained unresolved.
In the U.S., energy companies reduced the number of oil and natural gas rigs operating for the second consecutive week, as reported by energy services firm Baker Hughes in its latest update.