By Georgina McCartney
Oil prices fell by about 11% on Friday after Iran’s foreign minister said passage for all commercial vessels through the Strait of Hormuz was open for the remaining ceasefire period and US President Donald Trump said Iran has agreed to never close the strait again.
Brent crude futures fell $10.42, or 10.48%, to $88.97 a barrel by 4.40pm GMT, after falling to a session low of $86.09. US West Texas Intermediate crude futures were down $11.48, or 12.12%, at $83.21 a barrel, after touching $80.56.
Both contracts were trading at their lowest since March 10 and set for their largest daily declines since April 8.
Iranian foreign minister Abbas Araqchi said the Strait of Hormuz was open following the agreement of a ceasefire in Lebanon.
“With the market now rapidly unwinding the extreme risk premium built over the past two weeks, crude is shifting back toward pricing actual flow normalisation rather than disruption risk,” Gelber & Associates analysts said in a note.
Read: Iran’s foreign minister says passage of vessels via Hormuz Strait is open during ceasefire
The US and Iran have made progress in the negotiations over a three-page memorandum of understanding to end the war, according to an Axios reporter on X.
Prices had already fallen earlier in the session as possible further talks between the US and Iran over the weekend and a 10-day ceasefire between Lebanon and Israel raised investors’ hopes the war in the Middle East could be nearing an end.
Addressing a sticking point in the talks, Trump suggested Tehran had offered to not possess nuclear weapons for more than 20 years.
“We’re going to see what happens. But I think we’re very close to making a deal with Iran,” Trump told reporters outside the White House on Thursday.
Trump also said on Friday that the US has banned Israel from further bombing in Lebanon, using a harsher tone than usual with the long-time US ally.
Shortly after the announcement that the strait was open, a US official told Reuters that a military blockade of Iran involving more than 10,000 personnel remains in effect.
While the opening of the strait was a step in the right direction, the European market would remain tight for a while, analyst Ole Hvalbye at SEB Research said, since it takes roughly 21 days for ships to move from the Gulf to Rotterdam, the main crude port in the region.
Traffic could be halted again in the strait if an agreement on Iran’s nuclear ambitions and lifting of the US sanctions remains elusive, said Tamas Varga, an analyst at PVM Oil Associates.
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