Oil markets staged a sharp reversal Friday after both President Trump and Iran's foreign minister declared the Strait of Hormuz fully open for commercial shipping, sending crude prices tumbling more than 10 percent in a single session.
The magnitude of the selloff underscores how severely the energy market had priced in the risk of prolonged disruption to one of the world's most vital energy corridors. The strait handles roughly one-quarter of global seaborne oil trade, and any significant throttling of traffic there ripples instantly through commodity prices worldwide.
Iranian foreign minister Abbas Araghchi announced on X that "the passage for all commercial vessels through Strait of Hormuz is declared completely open" in connection with the ceasefire in Lebanon. He specified that transit would follow coordinated routes already established by Iran's Ports and Maritime Organisation.
Trump amplified the message on Truth Social, stating that Iran had announced the strait was "fully open and ready for full passage."
Benchmark Brent crude tumbled to $88.90 per barrel, marking its lowest level in more than a month. West Texas Intermediate, the primary U.S. crude reference, fell to $83.35. U.S. stock futures, which were already tracking higher before the announcement, extended gains on the news.
The timing matters. The ceasefire declarations arrive as separate negotiations over broader regional conflict appear to be making headway, suggesting the possibility of sustained de-escalation rather than a temporary pause. Market participants interpreted the dual announcements as a genuine signal that a prolonged energy supply crunch might finally be easing.
Still, questions linger about implementation. Shipping companies and oil traders will need to gauge whether these assurances carry enough weight to justify resuming normal transit operations through the narrow waterway. Some operators have rerouted around the cape during periods of heightened tension, adding weeks to voyages and significant costs. The margin between a declared opening and actual commercial confidence in that opening could determine whether prices stabilize at these new levels or tick upward again.
Author James Rodriguez: "A 10 percent oil crash on foreign minister promises is traders betting hard that the regional tension is genuinely cooling, but watch whether shippers actually start moving cargo back through the strait to confirm it's real."
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