U.S. crude below $84 and Brent drops 9% following Iran's announcement to reopen Strait of Hormuz

Oil prices fell sharply on Friday after Iranian Foreign Minister Abbas Araghchi announced that the Strait of Hormuz is now "fully open" during the ceasefire period between Israel and Lebanon, bolstering market hopes that major supply disruptions are receding.

Araghchi's statements on the "X" platform followed remarks by U.S. President Donald Trump late Thursday, in which he stated that the war with Iran, which began on February 28, "must be coming to an end very soon."

U.S. West Texas Intermediate (WTI) crude futures for May delivery plunged by about 12% to close at $83.85 per barrel. Global benchmark Brent crude for June delivery dropped 9% to reach $90.38 per barrel at the close.

In his post, Araghchi noted that vessels transiting the vital waterway must follow a "coordinated route" determined by Iranian maritime authorities.

Trump responded with a post on "Truth Social" thanking Iran for opening the Strait, but stated in a second post that the U.S. naval blockade on Iranian ports will remain "fully in effect" until an agreement is reached with Tehran.

Israel and Lebanon agreed on Thursday to a 10-day ceasefire that began at 5:00 PM ET. Israel's military campaign in Lebanon against the Iranian-backed group Hezbollah had previously hindered U.S. negotiations with Tehran.

In another "Truth Social" post, Trump stated that Israeli Prime Minister Benjamin Netanyahu and Lebanese President Michel Aoun would be invited to the White House for what he described as the first significant talks between the two countries since 1983.

The U.S. State Department added that the parties aim to create conditions for lasting peace, including mutual recognition of sovereignty, alongside enhancing border security and reaffirming Israel's right to defend itself.

It also noted shared concerns regarding non-state armed groups threatening Lebanese sovereignty, while Trump said he expects Lebanon to "deal with Hezbollah." These developments have bolstered hopes for a broader settlement of the Middle East conflict.

ING stated that oil prices began declining amid expectations that the U.S.-Iran ceasefire would be extended for an additional two weeks, with the potential resumption of talks to end the conflict.

However, the firm's analysts warned that the physical market is tightening with every day that oil flows through the Strait of Hormuz do not resume.

They added that even with some supplies rerouted via pipelines and limited tanker movements, the firm estimates that approximately 13 million barrels per day of supplies have been disrupted—a figure that could rise further if the U.S. blockade continues.

The analysts pointed out that "the greatest upside risk in the market is the failure of peace talks between the U.S. and Iran, a scenario that is not ruled out given the wide gap between the demands of both parties."