Oil prices drop significantly as Iran announces that the Strait of Hormuz is 'open' amid the ceasefire.

 

Oil prices have significantly decreased following Iran's announcement that the Strait of Hormuz would be "entirely open" to commercial vessels for the duration of the ceasefire in the US-Israel conflict with Iran. The price of a barrel of Brent crude dropped to $88 (£65) after this declaration, having previously exceeded $98 earlier on Friday. The Strait of Hormuz is a narrow waterway located south of Iran, through which approximately one-fifth of the world's oil and liquefied natural gas is usually transported. US President Donald Trump expressed his approval of Iran's statement, although maritime organizations are still in the process of confirming it. Iranian Foreign Minister Abbas Araghchi stated: "The passage for all commercial vessels through the Strait of Hormuz is officially declared completely open for the remaining duration of the ceasefire." Global markets responded positively to the announcement, with the S&P 500 index of the largest companies listed in the US closing up by 1.2%. The Cac index in Paris and the Dax in Frankfurt both finished the day with approximately a 2% increase, while London's FTSE 100 closed up by 0.7%.

The Strait of Hormuz has been effectively closed by Iran since the US and Israel initiated military strikes in the country in late February. Tanker traffic through this waterway has diminished to a mere trickle, significantly limiting the availability of oil and gas in global markets and leading to price surges.

While Iran says the Strait of Hormuz is "completely open" and Trump has voiced his appreciation, the international shipping body BIMCO has expressed concern, in advice to operators, about the ongoing risks.

Jakob Larsen, BIMCO 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 head of the International Maritime Organization (IMO) is trying to understand the details behind Iran's commitment to reopening the Strait of Hormuz, and tracking shows minimal ship movement.

The IMO's 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."

Sharp rises in the price of oil have pushed up the price of petrol and diesel for drivers, as well as sparking concerns over the supply of jet fuel, leading to fears airlines will have to ground flights.