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Iran reopens key oil route amid ceasefire
Global oil prices fell sharply Friday after Iran declared the Strait of Hormuz fully open to commercial vessels for the remainder of a ceasefire in its conflict with the U.S. and Israel. Brent crude, which had traded above $98 earlier in the day, settled at $88 a barrel following the announcement.
Strategic waterway's closure drove prices higher
The Strait of Hormuz, a narrow channel south of Iran, typically carries one-fifth of the world's oil and liquefied natural gas. Iran effectively closed the route after U.S. and Israeli military strikes began in late February, reducing tanker traffic to minimal levels and pushing Brent crude from under $70 to a March peak of $119.
By Friday afternoon, prices had rebounded slightly to $92 a barrel.
Markets rally but shipping industry remains cautious
Stock markets responded positively to the news. The S&P 500 closed 1.2% higher, while European indices rose around 2% in Paris and Frankfurt and 0.7% in London.
Despite Iran's assurance and a supportive post from U.S. President Donald Trump on Truth Social, maritime groups urged caution. BIMCO, a major shipping association, advised operators to avoid the area, citing unclear mine threats in the traffic separation lanes.
"The status of mine threats in the traffic separation scheme is unclear, and BIMCO believes shipping companies should consider avoiding the area."
Jakob Larsen, BIMCO Chief Safety and Security Officer
The International Maritime Organization (IMO) is also verifying Iran's commitment. Secretary-General Arsenio Dominguez said the agency is assessing whether the reopening complies with freedom of navigation standards.
Ceasefire offers limited relief for supply chains
Analysts noted the nine-day ceasefire provides only a brief window for tankers to navigate the strait, load cargo, and exit. Kieran Tompkins, senior commodities economist at Capital Economics, said trapped vessels may now depart, but traffic is unlikely to return to pre-war levels immediately.
Even if a longer-term peace deal is reached, supply chain disruptions will persist. Prof. ManMohan Sodhi of Bayes Business School warned that clearing backlogs could take months, keeping pressure on consumers.
Fuel and food prices face lingering pressure
The strait's closure had driven up petrol and diesel costs globally, raising concerns about jet fuel supplies and potential flight groundings. It also disrupted fertilizer shipments, with a third of key chemicals passing through the route, contributing to higher food prices.
In the UK, the RAC reported a slight drop in pump prices Friday-the first decline since the conflict began-but costs remain significantly higher than in February.
U.S. extends Russian oil sanction waiver
The oil price drop coincided with a U.S. decision to extend a waiver on Russian oil sanctions. The Treasury Department announced late Friday that deliveries of Russian crude and petroleum products already at sea would be permitted until May 16, aiming to boost global supplies.
The waiver, initially granted by President Trump in March, had drawn criticism from European and Canadian leaders who argued it would benefit Russia's war effort.
