Oil prices have fallen by around 15% after the USA and Iran declared a temporary ceasefire.
The two-week agreement was announced by President Trump after Iranian leaders agreed to end the blockade of the Strait of Hormuz in exchange for the US pausing its bombing operations in Iran.
Roughly 20% of the world’s oil and gas transits through the Strait, which borders Iran and has been closed to most shipping since 28 February.
A barrel of Brent Crude fell by 14% following the ceasefire announcement, dropping from around $109 a barrel to $94, though prices remain significantly inflated compared to the circa $60 price seen before the conflict began.
It could be some time before any oil-price falls translate to lower pump prices, though, due to the backlog in global supplies cause by the closure of the Hormuz; the temporary nature of the ceasefire agreement; and the time it takes price reductions in crude to filter through to refined petrol and diesel products.
Mohit Kumar, chief European economist at investment bank Jefferies, told the Guardian: “We do not see oil going back to pre-war levels anytime soon”, adding: “Even if the strait is opened, it could take months for energy supply to revert to normal levels.”
Gordon Balmer, executive director of the Petrol Retailers Association, shared similar sentiments, saying: “Falling oil prices are welcome news for motorists and if this trend continues it should be reflected in lower pump prices. However, it is to be noted that this is a temporary ceasefire and the market remains volatile”.
He added: “Oil prices are still above where they were prior to the conflict reflecting tensions in the Middle East and damage to some infrastructure. Fuel supplies in the UK remain resilient and where they need to be. My advice to motorists is that they should fill up as normal, shop around, and use the Petrolprices.com app to locate the best deals in their area.”
The ceasefire, brokered by Pakistan, followed a post on social media by President Trump on 7 April that declared “A whole civilisation will die tonight, never to be brought back again” and demanded: “Open the ****** Strait [of Hormuz] you crazy b******s, or you’ll be living in hell”.
