Crude oil slumps below US$ 100/bbl on US–Iran 2-week ceasefire agreement

Crude oil prices slumped by a staggering 15 percent in early Asian trade on Wednesday after the US and Iran agreed to a two-week ceasefire proposal, halting geopolitical turbulence in West Asia stemming from more than five weeks of drone and missile strikes. The decline in energy prices was further supported by expectations that supply tightness arising from the closure of the Strait of Hormuz would ease, with Tehran agreeing to reopen the critical energy transit waterway.

Benchmark Brent crude futures for June settlement on the InterContinental Exchange (ICE) slipped below US$ 100 a barrel in opening trade, falling 13.6 percent, or US$ 14.84 a barrel, to US$ 94.43 a barrel, down from the previous day's settlement of US$ 109.27 a barrel. Similarly, West Texas Intermediate (WTI) Cushing futures slumped 14.3 percent, or US$ 16.13 a barrel, to US$ 96.82 a barrel in early Wednesday trade, compared with US$ 112.95 a barrel on Tuesday.

A mixed trend was observed in energy futures on Tuesday, with the Brent contract declining 0.5 percent to settle at US$ 108.27 a barrel, down from US$ 109.13 a barrel on Monday. In contrast, WTI futures for May delivery rose 0.5 percent to settle at US$ 112.95 a barrel on Tuesday, up from US$ 112.40 at the previous close.

The United States and Iran have agreed to a two-week ceasefire proposal and will sit at the negotiation table to discuss business deals beginning Friday in Islamabad, Pakistan. Following the agreement, the US and Israel will jointly suspend drone and missile strikes on Iran, while Tehran will halt attacks on Tel Aviv, US military installations, and key infrastructure in the Middle East. The agreement has eased speculation of further escalation following the expiry of US President Donald Trump's 48-hour deadline, which ended early Wednesday morning (Indian Standard Time).

An analyst from Kedia Stocks and Commodities Research stated, "WTI crude futures dropped more than 15 percent to below US$ 95 a barrel after US President Donald Trump delayed planned strikes on Iranian civilian infrastructure, announcing a two-week 'double-sided ceasefire' contingent on Iran reopening the Strait of Hormuz. The temporary agreement, also assented to by Israel, alleviated fears of supply disruptions through the critical waterway, which handles roughly 20 percent of global oil flows. The news eased pressure on energy markets that had been spiking due to conflict risks, reducing near-term inflation concerns and global economic slowdown risks, thereby driving crude prices sharply lower."

Meanwhile, the dollar index dropped below 99, marking a four-week low, as easing geopolitical tensions weighed on safe-haven demand. The US decision to delay planned strikes on Iran and announce a two-week ceasefire tied to reopening the Strait of Hormuz improved global risk sentiment. Reports of a 10-point proposal from Iran further supported hopes for a negotiated resolution. Meanwhile, US inflation expectations rose in March, with logistics and transportation costs showing noticeable increases. Investors are now focused on upcoming March CPI data, which is expected to provide further clarity on inflation trends and the potential economic impact of recent geopolitical developments.



DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com