Brent crude futures collapsed 13% to settle below $95 per barrel after the United States and Iran announced a two-week ceasefire mediated by Pakistan, marking the steepest single-day decline since the Strait of Hormuz crisis began six weeks ago.
Largest One-Day Drop of the Crisis
Front-month Brent futures fell as much as $14 in the morning session before settling around $94.80 per barrel, while West Texas Intermediate dropped a similar percentage to close near $84. The 13% slide erased roughly half of the war-related risk premium that had built up since hostilities began in late February.
European natural gas markets posted an even more dramatic reaction. Dutch TTF futures, which had soared above €70/MWh on LNG supply fears, shed as much as 20% during the session — their largest intraday decline in more than two years.
Pakistan-Mediated Framework
The ceasefire was finalized after intensive shuttle diplomacy by Pakistani Prime Minister Shehbaz Sharif, who hosted U.S. and Iranian envoys in Islamabad over the weekend. Under the agreement, both sides will halt offensive operations for fourteen days while negotiators work toward a longer-term framework that addresses Iran's nuclear program, the status of the Strait of Hormuz, and reciprocal sanctions relief.
Crucially, the deal includes provisions for the gradual resumption of commercial shipping through the Strait under Iranian Maritime Authority coordination. The first convoys are expected to transit within 72 hours, escorted by a multinational naval task force operating under United Nations auspices.
Spot Market Tells a More Cautious Story
Despite the futures sell-off, physical Brent grades continued to trade at significant premiums to paper benchmarks. Dated Brent assessed by S&P Global Commodity Insights remained above $120 per barrel, reflecting persistent tightness in waterborne cargoes from the Atlantic Basin.
"The futures move is about removing tail risk, not restoring lost barrels," said one London-based physical trader. "Until we see tankers actually loading at Kharg, Ras Tanura and Mina Al-Ahmadi, the underlying supply picture hasn't changed by a single barrel."
Restoring Twenty Million Barrels Per Day
The Strait of Hormuz had been functionally closed to commercial traffic since early March, choking off approximately 20 million barrels per day of crude and refined products as well as roughly a quarter of global LNG flows. The International Energy Agency described the disruption as the largest supply shock in the history of the global oil market.
Restarting flows through the waterway will not be instantaneous. Insurance underwriters at Lloyd's have signaled that war-risk premiums on Gulf transits will only normalize gradually, and several major shipowners said they would wait for the second week of the ceasefire before committing tonnage to the route.
OPEC+ Recalibrates Strategy
The ceasefire announcement complicates OPEC+ planning. The producer group had agreed in early April to add 206,000 barrels per day in May to help cushion the supply shock, with several members already lifting output above quota. A rapid normalization in Gulf flows would risk pushing the market into surplus before summer demand peaks.
Saudi Arabia, which had ramped Yanbu terminal exports to nearly 4 million barrels per day to bypass the Strait, will need to manage the unwinding of those crash logistics carefully. Kuwait and Iraq, both of which had effectively halted seaborne exports, face an even larger logistical challenge in restarting upstream operations and clearing tanker queues.
Strategic Reserves and the Demand Side
Coordinated stock releases from the U.S. Strategic Petroleum Reserve and IEA member stockpiles totaled more than 180 million barrels over the six weeks of the crisis, drawing strategic inventories to their lowest level since the early 1980s. Replenishing those reserves will provide a price floor over the coming quarters even if Gulf production fully recovers.
Demand destruction has also been substantial. Asian refiners, particularly in India and South Korea, ran processing rates 8–12% below normal during March. A snap-back in their crude purchases could absorb a meaningful share of any returning Gulf supply.
Risks to the Truce
Analysts and diplomats caution that the ceasefire remains fragile. Iran's Supreme National Security Council has not formally ratified the framework, and hardline factions of the Islamic Revolutionary Guard Corps have publicly opposed any concessions on the nuclear file. On the U.S. side, congressional Republicans are pressing for a binding inspections regime as a precondition for sanctions relief.
Israel, which is not a signatory, issued a statement saying it reserves the right to act against any reconstitution of Iran's enrichment capacity. Markets will therefore remain hostage to the next incident, whether on the ground in Iran or at sea in the Gulf.
Trading Range Reset
With the immediate war premium compressing, sell-side analysts have begun to redraw their forecast ranges. Goldman Sachs cut its second-quarter Brent forecast to $90–$100 from a previous $110–$125 path, while JPMorgan flagged $85 as the near-term floor if Gulf flows resume on schedule. Citi was the most bearish on the desk, pointing to potential downside toward $80 if OPEC+ does not reverse its scheduled output addition.
Options markets reflected the shift, with three-month implied volatility falling more than 15 points intraday. The skew between put and call premiums normalized for the first time since February, suggesting at least a partial unwind of crisis-era hedges.
What to Watch Next
The next two weeks will test whether the ceasefire can hold long enough to translate into physical flow restoration. Market participants are focused on three signposts: confirmed tanker transits through Hormuz, formal Iranian ratification of the framework, and any OPEC+ communication on whether the May supply addition will proceed as planned or be deferred.
Until those questions are resolved, expect Brent to trade in a wide range as paper traders price the optimistic scenario and physical desks defend the cautious one.