Iran allows commercial ships to pass through the Strait of Hormuz... International oil prices plummet 11%

Iran announced that during the ceasefire, commercial ships are fully permitted to navigate through the Strait of Hormuz, leading to a sharp decline in international oil prices on the 17th.

The market's most sensitive reaction that day was the expectation that the key Middle Eastern oil transportation route might reopen. Iranian Foreign Minister Abdollahian announced via his X account that, given the ceasefire agreement between Israel and Lebanon taking effect, all commercial ships will be fully allowed to pass through the Strait of Hormuz during the remaining ceasefire period. The ceasefire between Israel and Lebanon officially took effect at 5 p.m. Eastern Time on the 16th and 6 a.m. Korean time on the 17th.

International oil prices responded with a decline. ICE futures for Brent crude oil delivery in June closed at $90.38 per barrel, down 9.1% from the previous trading day; West Texas Intermediate (WTI) futures for May delivery fell to $83.85 per barrel, plunging 11.5%. During trading, Brent crude briefly dropped to $86.09, and WTI fell to $80.56, both the lowest levels since March 10. Recently, oil prices have not only reflected actual supply and demand but also significantly embodied the so-called risk premium (the phenomenon of attaching uncertainty to prices) due to concerns over escalating war, and on that day, this bubble was being rapidly squeezed out.

The Strait of Hormuz is a critical passage for about 20% of the world's seaborne oil and liquefied natural gas transportation. Therefore, if this area is blocked, energy produced by oil-producing countries may not reach the market in time, heightening fears and potentially triggering an immediate rise in international energy prices. In fact, Iran’s blockade of the strait after the outbreak of the US-Iran war has long been considered a core background for recent global energy price surges. U.S. President Donald Trump also stated on Truth Social that Iran has agreed not to block the Strait of Hormuz anymore, mentioning that US-Iran peace negotiations could restart this weekend and that an agreement might be reached within a day or two.

Market analysis points in the same direction. Energy market consulting firm Gelber & Associates commented in their report that the market is rapidly unwinding extreme risk premiums. This means oil prices are moving away from the excessively high levels caused by war fears and are beginning to reflect the actual possibility of transportation normalization and supply recovery. This trend is likely to continue depending on whether the ceasefire can be maintained and the progress of US-Iran negotiations. If stability in the Middle East improves, oil price volatility may gradually subside.