Oil markets experienced their most dramatic single-day collapse in over five years following the announcement of a US-Iran ceasefire and the partial reopening of the Strait of Hormuz. West Texas Intermediate (WTI) crude futures tumbled more than 16% to close at $94.41 per barrel, while international benchmark Brent crude fell approximately 13% to settle at $94.75 — both recording their steepest one-day losses since April 2020 during the height of the COVID-19 pandemic demand collapse.
Five Weeks of Supply Shock — Ended in Hours
The oil price collapse reflected the sudden removal of a geopolitical risk premium that had built up over five weeks of US-Iran conflict. The blockade of the Strait of Hormuz — the narrow waterway through which roughly 20 million barrels of oil pass every day — had triggered the most severe supply disruption in modern energy history.
Gulf states including Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain had collectively shut in an estimated 7.5 million barrels per day of production, with forecasts pointing to a rise to 9.1 million barrels per day by April. The disruption had pushed the US Energy Information Administration (EIA) to sharply raise its oil and gasoline price forecasts for 2026 and 2027, with predictions of US gas prices peaking at $4.30 per gallon.
Market Reaction Across Asset Classes
The ceasefire triggered a broad relief rally across global financial markets. The Dow Jones Industrial Average surged 1,325 points (2.85%) to 47,909.92 — its best single-day gain in a year. The S&P 500 climbed 2.51% to 6,782.81, and the Nasdaq Composite jumped 2.80% to 22,635.00. South Korean stocks surged more than 8% in midday trading. Carnival Corporation shares jumped 10% as cruise line bookings, hammered by war fears, were expected to recover rapidly.
What Lower Oil Prices Mean
The sharp drop in crude prices is expected to translate into meaningfully lower petrol and diesel prices at the pump within days. Jet fuel — which had surged to around $209 per barrel globally — is expected to retreat, providing relief to airlines that had been rapidly hiking passenger fees to offset ballooning fuel costs. Analysts caution, however, that the ceasefire is only two weeks old, and any breakdown in Islamabad negotiations could send prices surging again.
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