Global oil prices crashed overnight after President Donald Trump and Iran agreed to a conditional two-week ceasefire that includes reopening the Strait of Hormuz, the world's most critical oil chokepoint. Brent crude plummeted 15.9% to $92.30 per barrel while Asian stock markets soared, with Japan's Nikkei jumping 4.5% and South Korea's Kospi gaining 5.5% as energy-dependent economies breathed collective relief.
The dramatic reversal came just hours before Trump's 8 p.m. ET deadline Tuesday, when he had threatened that "a whole civilisation will die tonight" if Iran failed to reopen the strait. In a Truth Social post, Trump announced he would "suspend the bombing and attack of Iran for a period of two weeks" subject to Iran agreeing to the "COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz."
Iranian Foreign Minister Abbas Araghchi responded on social media that Tehran would agree to a ceasefire "if attacks against Iran are halted," adding that safe passage through the Strait of Hormuz "will be possible."
Asian Economies Find Relief
The ceasefire delivered immediate relief to energy-starved Asian economies, many of which import the majority of their oil from the Gulf region. The Philippines, which imports 98% of its oil from the Middle East, had declared a national energy emergency on March 24 after petrol prices more than doubled during the conflict.
Airlines across the region had raised fares and cut flights in response to surging jet fuel prices, while governments scrambled to secure alternative energy supplies. The sudden price drop promises to ease those pressures, though analysts caution that full recovery will take time.
"The ceasefire is good news for Asian countries," said Ichiro Kutani from Japan's Institute of Energy Economics, according to BBC News. "If it holds, oil prices will return to normal states, though this will take time."
Infrastructure Damage Remains
Despite the price relief, energy analysts warned that production disruptions could persist for months. Saul Kavonic from MST Marquee told BBC News that while more oil tankers stranded near the strait may pass through during the ceasefire, full energy production in the Middle East is unlikely to resume until there's confidence in a lasting peace deal.
The conflict, which began February 28 when the US and Israel launched strikes on Iran, has created what CNBC described as "the largest disruption of crude supplies in history." Oil prices had surged from around $70 per barrel before the conflict to over $110 at their peak.
Kavonic noted that infrastructure damage from weeks of conflict could take months to repair, meaning production capacity may remain constrained even as shipping lanes reopen.
Political Calculations
The timing of Trump's decision reflects political realities alongside strategic considerations. Xavier Smith from AlphaSense suggested to BBC News that Trump was likely wary of letting energy prices "skyrocket" by escalating the conflict, as this could have created a "self-inflicted economic wound" that few would risk, especially given pressure on Trump's approval ratings.
The Guardian reported that Trump's announcement came "with just over an hour until his deadline was due to pass," highlighting the brinkmanship that characterized negotiations. Pakistan's prime minister had urged Trump to extend his deadline for another two weeks while asking Iran to open the strait for the same period.
Developing Asian nations, many lacking their own refineries or sufficient oil reserves, had been particularly vulnerable to the supply disruption. The ceasefire provides crucial breathing room for these economies to stabilize energy costs and rebuild depleted strategic reserves.
While oil prices remain elevated compared to pre-conflict levels of around $70 per barrel, the dramatic overnight decline signals market confidence that the immediate supply crisis may be easing. Whether the two-week ceasefire can evolve into lasting stability remains the critical question facing energy markets and the global economy.
