Oil prices fell sharply after Iran announced that the Strait of Hormuz would remain “completely open” to commercial shipping for the duration of the ceasefire in the US–Israel conflict with Iran.
Brent crude dropped to $88 (£65) per barrel following the statement, having traded above $98 earlier on Friday.
The Strait of Hormuz, a narrow waterway south of Iran, typically carries around one-fifth of the world’s oil and liquefied natural gas supplies.
US President Donald Trump welcomed the announcement, although maritime organisations said they were still working to verify the details.
Iranian Foreign Minister Abbas Araghchi said: “The passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire.”
Global financial markets responded positively, with the S&P 500 closing 1.2% higher. Europe’s Cac index in Paris and Dax in Frankfurt both gained around 2%, while London’s FTSE 100 ended the day up 0.7%.
The strategic waterway had effectively been closed by Iran since US and Israeli forces launched strikes in the country in late February.
As a result, tanker traffic slowed significantly, constraining global supply and driving oil and gas prices higher.
Before the conflict, Brent crude traded below $70 per barrel. Prices surged above $100 and peaked at more than $119 in March, before rising again to $92 later on Friday.
Despite Iran’s declaration and support from Trump, industry bodies warned that risks remain. The Baltic and International Maritime Council (BIMCO) advised shipping operators to exercise caution.
Jakob Larsen, BIMCO’s chief safety and security officer, said: “The status of mine threats in the traffic separation scheme is unclear and BIMCO believes shipping companies should consider avoiding the area.
“This means that the Traffic Separation Scheme is not declared safe for transit at this point.”
Meanwhile, the International Maritime Organization (IMO) said it was seeking further clarity on Iran’s commitment.
IMO Secretary-General Arsenio Dominguez said on social media: “We are currently verifying the recent announcement related to the reopening of the Strait of Hormuz, in terms of its compliance with freedom of navigation for all merchant vessels and secure passage using the IMO established traffic separation scheme.”
The surge in oil prices has already fed through to higher petrol and diesel costs, while also raising concerns over jet fuel supplies and potential disruption to airline operations.
The closure has also disrupted fertiliser supply chains, with roughly a third of key fertiliser chemicals passing through the Strait. Prices have risen sharply, raising fears of increased food costs.
However, shortly before Iran’s announcement, the RAC reported a slight easing in UK fuel prices — the first decline since the conflict began — with pump prices falling on Thursday and continuing into Friday.
Iran’s move to reopen the Strait followed a ceasefire agreement between Israel and Lebanon.
Trump welcomed the development on Truth Social, writing: “IRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE. THANK YOU!”
He added that Iran had agreed “to never close the Strait of Hormuz again… it will no longer be used as a weapon against the world”.
In a subsequent post, however, Trump said a naval blockade of Iran would remain “in full force and effect” until a permanent agreement to end the conflict is reached.
Despite the announcement, some operators remain cautious. One oil and gas shipping company told the BBC that the development “doesn’t change anything” in the immediate term.
“We don’t feel like we need to be taking unnecessary risks and our company approach is that we won’t be the first to go through the Strait”, the unnamed operator said.
Stena Bulk, a tanker operator in the region, said it was closely monitoring the situation.
“The safety of our crew and vessels governs every routing decision, and we will not transit until we are satisfied it is safe to do so”, the company said.
Kieran Tompkins, senior climate and commodities economist at Capital Economics, said the ceasefire — due to expire in nine days — provides only limited scope for activity.
“offers only a narrow window of opportunity for oil tankers to navigate the Strait, load up, and exit”.
“That suggests that the number of vessels entering the Strait may not return to pre-war norms yet, but it does offer an opportunity for trapped tankers to leave,” he added.
Professor ManMohan Sodhi of Bayes Business School warned that consumers may continue to feel the impact even if a longer-term deal is reached.
“Supply chains will take months to clear,” he said.
