Global energy markets saw a sharp shift after Iran signalled the reopening of the strategically crucial Strait of Hormuz, raising hopes of easing tensions in the Middle East following weeks of intense conflict.
Iranian Foreign Minister Abbas Araqchi announced that the vital shipping route would remain “completely open” for commercial vessels during the ongoing ceasefire period linked to a truce in Lebanon. The move comes amid diplomatic efforts to stabilise the region after a prolonged conflict involving Iran, Israel, and the United States.
Approximately 55-60% of India's crude imports originate from the Middle East, with a significant portion passing through this strait. Roughly 60% of India's LPG demand is met through imports, with nearly 90% of these passing through the Strait of Hormuz.
Reacting swiftly to the development, oil prices plunged sharply, reflecting improved supply expectations. Brent crude dropped over 11% to $87.87 per barrel, while WTI crude fell by more than 12% to $83.13 per barrel. The decline extends earlier losses as markets responded positively to reduced risks of supply disruptions through one of the world’s most critical energy corridors.
The Strait of Hormuz handles nearly one-fifth of global oil and liquefied natural gas shipments, making its closure during the conflict a major concern for global energy security. The blockade had threatened to trigger one of the worst oil supply shocks in history, particularly after hostilities escalated following the U.S.-Israeli attack on Iran that began on February 28.
Meanwhile, a fragile 10-day ceasefire between Israel and Hezbollah in Lebanon appeared to be holding, offering a potential pathway for broader de-escalation. While celebratory scenes were reported in Beirut, uncertainty persists over the long-term durability of the truce and whether all stakeholders will fully adhere to the agreement.
U.S. President Donald Trump expressed optimism, stating that a broader deal to end the Iran conflict could be reached “soon,” though no clear timeline has been confirmed. Despite the ceasefire, tensions remain elevated, with reports of sporadic violations and concerns over territorial control in southern Lebanon.
Adding to the complexity, the International Energy Agency has warned that even if stability returns, the Middle East may take up to two years to restore oil production to pre-war levels. The war has already caused an unprecedented disruption, with global oil supply dropping by over 10 million barrels per day in March alone.
As diplomatic negotiations continue, the reopening of the Strait of Hormuz offers temporary relief to global markets. However, the long-term outlook remains uncertain, with geopolitical risks and supply recovery timelines likely to shape energy prices and economic stability in the months ahead.