Oil Prices Fall 3% as Iran-Israel Ceasefire Eases Fears of Supply Disruption and Hormuz Closure

Global oil prices dropped more than 3% on Tuesday, following news of a ceasefire between Iran and Israel, which helped ease market concerns over potential disruptions in oil supply and the closure of the vital Strait of Hormuz.

Oil Prices Drop Sharply

Brent crude (August contract) fell to $69.13 per barrel, down 3.29% from the previous session.

WTI crude (August contract) slipped 3.3% to $66.25 per barrel.

Oil prices had surged nearly 10% in mid-June after direct military involvement by the U.S. and Iran’s retaliatory strikes in Qatar fueled fears of broader conflict. But a ceasefire announcement by U.S. President Donald Trump has helped stabilize market sentiment—though questions remain about its enforcement and Iran's nuclear ambitions, which triggered the conflict.

Oil Supply Risks Start to Ease

Iran, a key oil producer, pumped 3.3 million barrels per day in May, according to OPEC data. Any escalation could have impacted not only Iran’s output but also oil flows from the wider Middle East region.

One of the biggest concerns was whether Iran would follow through on threats to shut the Strait of Hormuz, a strategic chokepoint for oil exports from Saudi Arabia, the UAE, Iraq, Kuwait, and Bahrain.

On Sunday, Iran’s parliament reportedly approved a plan to close the strait, though the final decision rests with its National Security Council.

Analysts Weigh In

Barclays analysts warned that closure of the Strait of Hormuz remains a tail risk. If it were to happen, oil prices could "surge past $100 per barrel" due to the lack of alternative shipping routes.

However, prices cooled after the ceasefire news. Barclays added that "oil prices came under pressure as the threat of a wider regional war did not materialize, despite U.S. strikes on Iranian nuclear sites."

Emergency Stockpiles and OPEC+ Strategy

To calm the market, the International Energy Agency (IEA) reassured that it has 1.2 billion barrels of emergency reserves available.

At the same time, OPEC+ producers have started increasing output as part of a pre-existing strategy. Many members also have spare capacity they can tap if supply issues arise.

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