Oil prices experienced significant volatility as doubts over the durability of a Middle East ceasefire and the closure of the Strait of Hormuz by Tehran drove sharp market swings. West Texas Intermediate (WTI) crude rebounded above $93.00 per barrel after falling to lows near $86.00 earlier in the week, trimming losses from the previous two days [1]. Brent crude saw a dramatic 13.29% drop to a four-week low of $94.75 per barrel, before rebounding by 2.34% to $96.97 per barrel as concerns about Hormuz shipping and the ceasefire's stability persisted [2]. WTI also fell 16.41% to $94.41 per barrel during the initial selloff [2].
The closure of the Strait of Hormuz by Tehran was in retaliation for Israel’s attack on Lebanon, which Iran considered a violation of the ceasefire agreement. The US and Israel stated that operations against Hezbollah in Lebanon were not covered by the deal, and US President Donald Trump warned of further action if Iran fails to comply with the terms [1]. Despite these tensions, the US and Iran announced plans to send delegations for direct peace talks in Pakistan starting Saturday, offering some hope to investors and preventing oil prices from rising further [1].
Crude oil prices remain nearly 40% above pre-war levels, even after recent declines, reflecting ongoing market caution about the prospects for a durable peace and the reopening of the Strait of Hormuz [1]. Deutsche Bank strategists noted that while the ceasefire initially sparked optimism and a sharp drop in oil prices, persistent restrictions on Hormuz shipping led to more modest declines in longer-dated futures, with the 6-month Brent future down only 2.33% to $81.19 per barrel [2].
OPEC+ agreed last weekend to increase output quotas by 206,000 barrels per day in May, but implementing this will be challenging with Hormuz closed and Gulf countries facing limited supply capacity due to war-related damage to oilfields [1]. The market remains volatile, with oil prices still well below the pre-ceasefire level of around $110 per barrel [2].
CONCLUSION
Oil markets remain highly volatile as ceasefire doubts and the closure of the Strait of Hormuz drive sharp price swings. While peace talks offer some hope, persistent supply disruptions and geopolitical risks continue to weigh on sentiment. The market impact is high, with prices still elevated compared to pre-war levels and uncertainty likely to persist.