Crude Posts Historic Drop
Oil prices fell sharply Wednesday as a fragile ceasefire between the United States and Iran took effect, raising hopes that shipments could resume through the Strait of Hormuz, a chokepoint that normally handles about 20% of the world’s oil supply.
WTI crude, the U.S. benchmark, plunged 16.41% to settle at $94.41 per barrel. Brent crude, the global benchmark, dropped 13.29% to close at $94.75, its lowest settlement since March 11. Both benchmarks recorded their steepest single-day declines since April 2020.
Despite the retreat, prices remain elevated compared with pre-war levels on February 27, when WTI closed at $67 and Brent at $73.
Relief Rally Lifts Global Stocks
U.S. equities staged a powerful rebound. The Dow Jones Industrial Average soared 1,325 points, or 2.85%, marking its strongest session in a year. The S&P 500 rose 2.51%, while the Nasdaq Composite climbed 2.8%.
Markets worldwide followed suit. South Korea’s Kospi advanced 6.87%, Japan’s Nikkei gained 5.39%, and Hong Kong’s Hang Seng added 3.09%. In Europe, Germany’s Dax jumped 5.06% and France’s CAC 40 rose 4.49%.
Wall Street’s volatility index, the VIX, fell 22%, nearing pre-conflict levels.
Uncertainty Over Strait Reopening
Questions remain about whether oil tankers will freely transit the Strait of Hormuz. White House press secretary Karoline Leavitt said Iran has assured U.S. officials that traffic is being allowed, despite reports of renewed restrictions following Israeli strikes in Lebanon.
The war triggered what analysts describe as the largest oil supply shock on record, disrupting an estimated 12 to 15 million barrels per day. As of Tuesday, data from Kpler showed 187 tankers carrying 172 million barrels of crude and refined products still inside the Gulf.
Bob McNally of Rapidan Energy Group cautioned that reopening the strait fully is critical. “That’s the whole ball of wax,” he said, noting that Washington and Tehran appear to have differing interpretations of the agreement.
Transit Fees and Economic Impact
Iranian outlets reported that Iran and Oman may impose transit fees of $1–2 million per tanker. According to Neil Shearing of Capital Economics, such fees would add roughly $1 per barrel to transport costs — a modest direct effect but potentially a shift in control over a vital shipping lane.
In recent weeks, some shipping companies reportedly paid about $2 million to guarantee safe passage.
Gas Prices and Consumer Relief
U.S. drivers have seen gasoline prices surge $1.18 per gallon, or 40%, to an average of $4.16, according to AAA. Analysts expect modest relief in coming days, though price-tracking firm GasBuddy estimates it could take one to two weeks for national averages to dip below $4.
Oil analyst Andy Lipow noted that crude remains about $30 higher than pre-war levels and that restarting Gulf production could take weeks or months.
Ceasefire Remains Fragile
Iranian officials have emphasized the truce is temporary, with military branches ordered to pause operations under guidance from the Supreme Leader. President Donald Trump said the ceasefire hinges on reopening the Strait of Hormuz and cited a 10-point proposal from Iran as a workable framework.
Traders are now watching for concrete signs that stranded oil and gas volumes begin moving through the waterway. Early ship-tracking data suggests limited movement, but clearing the backlog may take time.
