Global oil prices staged their sharpest single-day drop since April 2020 on Wednesday after a fragile US-Iran ceasefire came into effect, sending crude benchmarks tumbling and triggering a relief rally across stock markets worldwide — including in emerging economies deeply exposed to energy price volatility.
WTI crude, the American benchmark, plunged 16.41% to settle at $94.41 per barrel, while Brent crude — the global standard — fell 13.29% to $94.75 per barrel, its lowest close since mid-March. Both moves were historic in scale, though oil remains significantly elevated compared to pre-war levels. Before the Middle East conflict erupted, Brent was sitting at around $73 per barrel on 27 February.
The market reaction was immediate and dramatic. US stocks soared, with the Dow Jones Industrial Average surging 1,325 points — a gain of 2.85% — marking its best single session in a year. The S&P 500 climbed 2.51%, and the Nasdaq Composite added 2.8%. Wall Street’s fear gauge, the VIX, dropped 22%, nearly returning to pre-war levels.
The optimism was fuelled by hopes that oil tankers would once again be permitted to transit the Strait of Hormuz, the narrow waterway through which roughly 20% of the world’s oil supply normally flows. The effective closure of that passage since the conflict began has been described as the biggest oil supply shock on record, cutting off an estimated 12 to 15 million barrels of crude per day.
US-Iran Ceasefire Lifts Oil Markets, But Strait of Hormuz Questions Linger
Despite the euphoria in financial markets, serious questions remain about whether the ceasefire will hold — and crucially, whether the Strait of Hormuz will fully reopen. White House press secretary Karoline Leavitt confirmed that Iran had assured Washington the waterway was open to traffic, even as conflicting reports emerged following fresh Israeli strikes on Lebanon.
Bob McNally, founder of Rapidan Energy Group, captured the uncertainty best when he told CNN: “The market has been eager to get good news but it remains to be seen if the Strait of Hormuz opens fully. That’s the whole ball of wax and so far Washington and Tehran seem to be talking past each other on that.”
Adding another layer of complexity, Iran’s semi-official Tasnim news agency reported that Tehran and Oman are planning to charge transit fees for vessels passing through the strait — reportedly as high as $2 million per tanker. That kind of arrangement is unlikely to sit well with the United States or its allies, particularly if revenues flow to Iran’s Islamic Revolutionary Guard Corps (IRGC), which many Western nations have designated a terrorist organisation.
Neil Shearing, group chief economist at Capital Economics, calculated that fees of $1 to $2 million per tanker would add roughly $1 per barrel to the cost of transported oil — a relatively modest direct impact, but one that could amount to what he called a “de facto partial nationalisation of the shipping route.”
Iran has also been explicit that the ceasefire is not permanent. A statement broadcast on state-run channel IRIB read: “This is not the end of the war but all military branches should follow the Supreme Leader order and cease their fire.” Tehran has simultaneously asserted the right to regulate passage through the Strait of Hormuz, claiming that gives the country “unique economic and geopolitical standing.”
As of Tuesday, ship-tracking platform MarineTraffic reported early signs of movement, noting that a Greek-owned bulk carrier and a Liberia-flagged vessel had transited the strait. But trade intelligence firm Kpler put the scale of the backlog in stark perspective — as of Tuesday, 187 tankers carrying 172 million barrels of crude and refined products remained trapped inside the Gulf.
That is not a bottleneck that clears in days. Oil analyst Andy Lipow of Lipow Oil Associates stressed that even with a ceasefire, crude is still $30 per barrel above its pre-war level and gasoline futures remain roughly 70 cents higher. “It will take weeks if not months to restart crude oil production in the Persian Gulf and get it exported,” he warned.
For South Africans, the implications are clear — fuel prices in this country are directly tied to the Brent crude price and the rand-dollar exchange rate, and any sustained reduction in global oil prices would flow through to the pump, albeit with the usual lag. The war-driven price spike has been punishing for South African consumers already grappling with a high cost-of-living environment.
Globally, the relief rally extended far beyond Wall Street. South Korea’s Kospi surged 6.87%, leading Asian gains. Japan’s Nikkei gained 5.39% — its best session since April of last year. In Europe, Germany’s Dax jumped 5.06% and France’s CAC 40 climbed 4.49%, each recording their strongest day since March 2022.
President Donald Trump agreed to the ceasefire less than two hours before a self-imposed 8 p.m. ET deadline he had set to take more drastic action. He subsequently posted on Truth Social that the US had received “a 10-point proposal from Iran” and believed it to be “a workable basis on which to negotiate.” Trump tied the agreement directly to the reopening of the Strait of Hormuz.
What remains sobering is the broader geopolitical reality. As Karl Schamotta of Corpay Currency Research noted, Iran’s regime has arguably used this conflict to demonstrate something the world will not easily forget — its capacity to bring global oil and gas markets to their knees. Whether the ceasefire holds, whether the strait fully reopens, and whether the diplomatic gap between Washington and Tehran can genuinely be bridged are questions that will define energy markets — and economies like South Africa’s — in the weeks and months ahead.