Oil prices sink, boats stay afloat: Trump, Iran agree on ceasefire to reopen Strait of Hormuz

President Donald Trump agreed to a two-week ceasefire with Iran hours before his deadline, he announced on social media. The deal suspends U.S. bombing as long as Iran reopens the Strait of Hormuz and agrees to safe passage. Tense talks averted a wider war.

Trump mentioned in his post on social media that Iran offered a 10-point proposal. He called it a "workable basis on which to negotiate." The pact came after threats of attacks on Iranian power plants and bridges.

Following the agreement, oil prices plummeted, CNBC reported, confirming that by 1 p.m. ET, U.S. West Texas Intermediate fell over 16% to a cost of $94.62 per barrel. Additionally, Intercontinental Exchange Europe Brent Crude also fell over $13%, now sitting at $94.16 per barrel. 

According to CNBC, before the ceasefire was reached, the sharp decrease of oil exports in the Strait of Hormuz led to the "largest disruption of crude supplies in history."

Behind-the-scenes diplomacy

Supreme Leader Mojtaba Khamenei approved the deal, Axios said. U.S. envoy Steve Witkoff called Iran's counter-proposal a "disaster," the report stated. Mediators from Pakistan, Egypt and Turkey shuttled drafts all day Monday.

Iranian Foreign Minister Abbas Araghchi played a key role. He pushed Revolutionary Guards commanders to accept terms, according to a regional source, though Axios stated Khamenei had final approval. "Without his green light, there wouldn't have been a deal," the regional source said, as reported by Axios.

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Trump warned Tuesday morning on X, "A whole civilization will die tonight," Axios confirmed. Yet momentum built. Vice President Vance worked phones from Hungary with Pakistanis, and Israeli Prime Minister Benjamin Netanyahu stayed in touch with Trump, the report noted.

According to the same report, Pakistani Prime Minister Shehbaz Sharif posted terms on X around noon ET. Trump got hawkish pushback but spoke to Netanyahu and Field Marshal Asim Munir to seal it. Axios added that U.S. forces stood down 15 minutes after Trump's post.

Key terms and risks

Araghchi stated Iran would cease attacks if not hit, as reported by NBC News. "For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran's Armed Forces," he said, according to NBC News.

U.S. strikes hit Kharg Island and bridges beforehand. Death toll tops 3,400, with over 1,600 civilians killed, NBC reported. Pakistan Prime Minister Shehbaz Sharif encouraged further peace talks this Friday in his post on X.