Kolkata: Crude oil prices plunged early on Wednesday with reports of a two-week ceasefire between the US and Iran spreading in a world growing weary of the flip flops by the US president which threatened deadly strikes and pause in the war. Prices of both Brent and West Texas Intermediate varieties of crude fell by more than 16% as the ceasefire indications became firm. The hope now obviously is that the guns will fall silent and energy supplies will be gradually restored. Brent crude price went down by as much as 16% to reach below $92 a barrel and West Texas Intermediate began trading around $95, reported Bloomberg, which described the WTI decline as the highest in about six years. US President Donald Trump, however, said the two-week ceasefire is contingent upon Iran allowing ships to pass through the Strait of Hormuz. Trump also said if the condition is met, the two parties will sign an agreement “to be finalized and consummated.” Israel has also reportedly agreed to the ceasefire.
Opening of Strait of Hormuz a possibility
Donald Trump announced the ceasefire just before his threat to obliterate Iran if it fails to reopen the Strait of Hormuz ended on Tuesday. Reuters quoted a statement by Iran’s foreign minister Abbas Araqchi, who said that they would halt attacks if attacks were stopped against it. He also said that safe passage through the crucial Strait of Hormuz would be possible for two weeks.
The surge from $70/barrel level
The price of crude was around $70 a barrel on Feb 27, a day before US and Israel bombed the residence of Iran’s supreme leader killing him along with a few members of his family and several senior military officers. The price of crude went upto $120 a barrel during the course of the war and stayed above $110 a barrel for most of the days so far. This surge in prices of more than 50% in a few days and the choking of the Strait of Hormuz that allows 20% of the world’s maritime shipments of crude oil prompted the IEAA executive director to say that the West Asia crisis resulted in an enrgy shock that was worse than the two oil shocks of the 1970s and the 2022 one following Russia’s attack on Ukraine put together.