Live updates: US and Iran agree to conditional ceasefire
Oil prices plunged on Wednesday after US President Donald Trump announced a two-week pause in strikes on Iranian energy and civil infrastructure and Iran agreed to open the Strait of Hormuz.
In a post on Truth Social, Mr Trump said that after talks with Pakistan, he had agreed to "suspend the bombing and attack of Iran for a period of two weeks", subject to Tehran immediately opening the Strait of Hormuz.
"We received a 10-point proposal from Iran, and believe it is a workable basis on which to negotiate," Mr Trump wrote in his post.
Iran claimed victory and its Foreign Minister Abbas Araghchi said “for a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces” if attacks against Iran are halted.
“Our Powerful Armed Forces will cease their defensive operations,” he said in a statement.
Bloomberg, quoting a White House official, said Israel has also agreed to the ceasefire.
Brent, the benchmark for two thirds of the world’s oil, slumped 13.11 per cent to $94.95 a barrel at 5.17am UAE time on Wednesday. West Texas Intermediate, the gauge for US oil, was down 14.21 per cent to $96.90 a barrel.
Brent was marching to its intraday high of almost $120 a barrel reached on March 19, amid Mr Trump's repeated threats to destroy Iranian energy infrastructure if Tehran did not immediately agree to a ceasefire and opening of the sStrait, the chokepoint through which 20 per cent of the global oil and gas supplies pass through.
Wild swings
Crude prices have swung wildly in the past few weeks, gaining almost 60 per cent - the biggest monthly gain on record - in headline-driven trading.
Hours ahead of announcing the two-week pause in bombing, the US President threatened Iran that Washington is willing to obliterate Iran's power plants and bridges if there were no deal.
“A whole civilisation will die tonight, never to be brought back again. I don’t want that to happen but it probably will,” Mr Trump said on Tuesday on Truth Social. “Maybe something revolutionarily wonderful can happen, who knows? We will find out tonight.”
Markets feared that strikes on Iran's energy civil infrastructure, and Tehran’s potential retaliatory attacks on its Arab neighbours would worsen disruption to global energy supplies.
Iranian officials had warned of – and carried out – retaliatory attacks on American interests in the region. Tehran has been attacking its neighbours in the Gulf, hitting civilian and energy infrastructure including oil and gasfields, industrial and petrochemical plants, as well as refineries.
Dramatic de-escalation
The dramatic de-escalation in the five-week-long conflict is aimed at allowing diplomacy to take place.
The blockade of Hormuz, as well as production disruption, have triggered a global energy crisis. The effects have been felt strongly in Asia and Europe, which depend on the flow of oil and gas from the Gulf.
With disruptions of energy flows from the Strait of Hormuz and the rising cost of fuel, inflation is on the rise. Several Asian economies have already been forced to ration energy consumption.
The International Monetary Fund and the World Bank have warned of serious consequences for the global economy if the war continues for a prolonged period.
Market participants include Global energy consultancy FGE NexantECA expected oil to surge to $150 or $200 a barrel in absence of a solution to open the Strait of Hormuz.
“Every week, 100 million barrels of oil are not going through, and every month, 400 million barrels are not going through,” the company's chairman emeritus Fereidun Fesharaki said at the end of March. “So, within a period of time, these losses to the market will be astronomical.”
Analysts from Wood Mackenzie also hinted last month that Brent could reach $150 or even $200 a barrel. Iran also warned of the possibility of oil prices reaching $200 a barrel, with a military spokesman last month saying the world should “get ready” for such a scenario.
Hand on the trigger
After the US announcement, Iran declared "victory" in getting the US to accept its 10-point plan.
The plan, according to a statement by Iran's Supreme National Security Council, includes a US commitment to "non-aggression", continued Iranian control over the Strait of Hormuz, acceptance of uranium enrichment, lifting all sanctions, the withdrawal of US combat forces from the region, and the "cessation of the war on all fronts, including against the heroic Islamic resistance in Lebanon".
The Supreme National Security Council said that negotiations will begin on Friday in Islamabad.
"Our hands remain upon the trigger, and should the slightest error be committed by the enemy, it shall be met with full force," it said.
The US has yet to elaborate what is included in the 10-point plan and if Iran will continue to exert control over the strait.
In his social media post, Mr Trump said he has agreed to the two-week delay because the US had “already met and exceeded” all of its military objectives and was “very far along with a definitive agreement concerning long-term peace with Iran, and peace in the Middle East".
“Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two-week period will allow the agreement to be finalised and consummated,” he said.
