Oil prices plunged to their lowest levels in over a week after news of a ceasefire agreement between Iran and Israel. The announcement reduced fears of a wider conflict that could have disrupted oil supplies from the Middle East. This development is central to the trend as oil prices dropped sharply following the news.
Brent crude fell $2.08, or 2.9%, to $69.40 per barrel. Earlier in the session, it dropped more than 4%, hitting its lowest point since early June. Meanwhile, U.S. West Texas Intermediate (WTI) crude dropped by $2.03, or 3.0%, settling at $66.48 per barrel. At its lowest, it sank 6%, marking a low not seen since early June.
President Donald Trump revealed that Iran would begin the ceasefire immediately. Israel agreed to follow within 12 hours. If both sides maintain the truce for 24 hours, the 12-day war will officially end. This announcement quickly reduced geopolitical risk in oil markets.
With this ceasefire in place, traders began pricing out the risk premium that had pushed prices higher in recent days. Oil prices dropped sharply as investors gained confidence in the return of stable supply flows from the region.
Tony Sycamore, an analyst with IG, noted that the ceasefire announcement had erased much of the risk priced into crude markets. Priyanka Sachdeva, a senior analyst at Phillip Nova, also emphasized that oil market movements now depend heavily on how well both sides stick to the ceasefire terms.
Tensions had recently spiked following U.S. airstrikes on Iranian nuclear facilities, which pushed oil prices to five-month highs. The involvement of the U.S. military brought global attention to the Strait of Hormuz. This narrow waterway sees nearly one-fifth of global oil supply pass through daily.
Traders feared any blockade or disruption in the Strait of Hormuz could cause oil prices to surge past $100 per barrel. However, the ceasefire has now eased that fear, at least temporarily. Investors now expect smoother shipping routes and increased Iranian exports if peace holds.
Both Brent and WTI crude contracts had dropped more than 7% in the previous session. Their recent highs came after a surge driven by supply fears and the threat of regional escalation. Oil prices dropped sharply as those fears faded almost overnight.
Technical analysts also pointed to a key resistance zone between $78.40 and $80.77. Unless a major supply shock emerges, this zone may cap future price rallies.