Global oil markets experienced a sharp downturn on Tuesday after Israel and Iran agreed to a ceasefire, ending nearly two weeks of escalating conflict that had rattled energy markets and driven prices to multi-month highs.
Brent crude, the international benchmark, fell by nearly 5%, dipping below $68 per barrel, while U.S. West Texas Intermediate (WTI) dropped to around $65.46. The price slump followed an announcement by former U.S. President Donald Trump, who brokered the ceasefire and declared it “now in effect,” urging both nations to honor the agreement.
According to GhanaWeb, the ceasefire brought immediate relief to investors who had feared a prolonged conflict could disrupt oil shipments through the Strait of Hormuz—a vital corridor for nearly 20 million barrels of oil per day. The initial spike in oil prices, which had reached as high as $81 per barrel, was driven by concerns that Iran might blockade the strait in retaliation for Israeli airstrikes on its nuclear facilities.
The conflict, which began on June 13, saw both nations exchange missile strikes, with the U.S. joining the fray by targeting Iranian military infrastructure. Iran responded by launching missiles at a U.S. base in Qatar, further intensifying fears of a broader regional war.
However, the ceasefire announcement on June 24 marked a turning point. As reported by MyJoyOnline, the truce was welcomed by global markets, with stock indices in the U.S., Europe, and Asia posting gains. The S&P 500 and Dow Jones Industrial Average rose by nearly 1%, while Germany’s DAX surged by 1.6%.
Despite the initial optimism, analysts remain cautious. “The extent to which Israel and Iran adhere to the recently announced ceasefire conditions will play a significant role in determining oil prices,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
The ceasefire’s fragility was underscored just hours after its announcement, when Israel accused Iran of violating the terms by launching another missile strike. While the incident did not immediately reverse the downward trend in oil prices, it highlighted the volatility of the situation.
As noted by Oil & Gas Middle East, the ceasefire has removed the geopolitical risk premium that had inflated oil prices in recent weeks. With Iran potentially resuming oil exports and the threat to the Strait of Hormuz temporarily averted, markets are recalibrating.
For oil-dependent economies like Nigeria, the price drop poses fiscal challenges. The country’s 2025 budget is benchmarked at $75 per barrel, and sustained prices below that level could strain public finances, as reported by ICIR Nigeria.
While the ceasefire has brought a temporary reprieve, the global energy market remains on edge. Any breakdown in the truce could reignite tensions and send prices soaring once again.
Implications for the Oil Industry
The ceasefire has temporarily removed the geopolitical risk premium that had inflated oil prices in recent weeks. According to Discovery Alert, the announcement triggered one of the most volatile trading sessions since 2022, as algorithmic trading systems rapidly unwound positions built on conflict fears.
For the oil industry, this development brings both relief and uncertainty. On one hand, the de-escalation reduces the immediate threat to critical infrastructure and shipping lanes, particularly the Strait of Hormuz, through which nearly 20% of global oil flows. On the other hand, the fragility of the ceasefire means that any renewed hostilities could send prices soaring again.
Producers in the Middle East, especially Iran, may now resume exports that had been disrupted. However, as Zawya reports, Iran’s oil exports had already ground to a halt during the conflict, and damage to infrastructure may delay a full recovery. Meanwhile, shipping and insurance costs remain elevated due to lingering risk perceptions.
For oil-dependent economies and companies, the ceasefire offers a window to stabilize operations and reassess supply strategies. But the industry remains on edge, knowing that peace in the region is far from guaranteed.
