WASHINGTON (dpa-AFX) - Crude oil went into a tailspin on Wednesday as supply-disruption risks have dissipated following a last-minute two-week ceasefire agreement between the U.S. and Iran.
WTI Crude Oil for May delivery was last seen trading down by $18.15 (or 16.07%) at $94.80 per barrel.
Since the start of the gulf war on February 28, Iran repeatedly denied various requests to remove the blockade it had imposed on the Strait of Hormuz.
Oil prices went through the roof, inflationary concerns rose, and major central banks halted their previous plans to institute rate cuts.
Air freight services were crippled and gasoline prices increased, and economists warned of 'demand destruction' as consumers started to cut back on their spending.
U.S. President Donald Trump served an ultimatum to Iran to open up the strait by Tuesday 08:00 p.m. ET.
Frustrated by Iran's unresponsiveness, Trump warned of a large-scale catastrophic blow to Iran and threatened to wipe out the entire civilization.
Iran announced its preparedness for any attack and counter-warned the U.S. of a furious retaliation.
Concerns of a potential large-scale escalation kept pushing oil prices higher.
Hours before Trump's deadline was about to end, Pakistan's Prime Minister Shehbaz Sharif announced that peace talks were progressing satisfactorily. Sharif asked Trump to extend the deadline for two more weeks and also asked Iran to open up the Hormuz Strait as an act of goodwill.
Giving much-wanted relief to the markets, around 06:30 p.m. ET on Tuesday, Trump announced a 'two-week halt' on all U.S. attacks on Iran.
Stating that China offered much support in this Pakistan-brokered truce, Trump called the ceasefire a 'double-sided' one.
Trump also acknowledged that the U.S. has received a 10-point proposal from Iran, emphasizing the plans have a workable basis to negotiate further.
Sharif stated that delegations from the U.S. and Iran are scheduled to meet in Pakistan's capital Islamabad on April 10. There are conflicting reports over who will attend the meeting though.
Though Sharif stressed that the ceasefire includes a halt on Israeli attacks on Lebanon, Israel declined his claim.
As the month-long escalation in the Middle East started to ease, 'risk premium' built into oil prices over the past few weeks diminished. As a result, stock markets rose and crude oil prices went into a tailspin.
On the inventory front, data from the American Petroleum Institute revealed that the U.S. crude oil inventories jumped by 3,720,000 barrels over the week ending April 3 as stocks continued to climb for the fourth straight week following a significant 10,263,000-barrel-increase in the previous week.
According to the U.S. Energy Information Administration, for the week ending April 3, crude oil inventories in the U.S. increased by 3,080,000 barrels. The rise indicates that supply outpaced demand in the U.S.
For the same period, gasoline inventories slipped by 1,589,000 barrels, while distillate inventories decreased by 3,144,000 barrels. However, heating oil inventories rose by 233,000 barrels.
Energy experts are 'cautiously optimistic' of further easing of prices as they are unsure if tanker owners would resume large-scale traffic of oil and petroleum products through the Strait of Hormuz with full confidence.
Average gasoline prices in the U.S. climbed by around 70 cents over the past few weeks. Analysts anticipate a price-reversal in the next two to three days.
The U.S. dollar index was last seen trading at 98.93, up by 0.01 (or 0.01%) today.
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