Nigerian crude oil, Bonny Light, dropped below $95 a barrel on Wednesday from above $130 after Iran agreed to reopen the Strait of Hormuz for two weeks in exchange for a temporary ceasefire with the United States.
Strait of Hormuz is a vital route for 20% of the world’s energy supply.
Bonny Light had increased by more than half since the Middle East conflict between the United States.
With Donald Trump’s deadline approaching for the Islamic Republic to reopen the waterway or face obliteration, he announced a halt to attacks for two weeks and said he had received a “workable” 10-point proposal.
Iran later said it had agreed to safe passage in the Strait, through which a fifth of global oil and gas passes.
The news pushed down crude prices, with West Texas Intermediate losing almost 20 per cent and Brent as much as 16 per cent as investors heaved a huge sigh of relief after more than five weeks of war that has hammered supplies.
Market reaction was swift and dramatic, with U.S. crude futures down around 15% to $96.31 a barrel, while Brent futures also slid 13% to $94.71 per barrel.
The euphoria also sent global equities rocketing on hopes that the crisis that has shocked the global economy for more than a month would come to an end.
READ ALSO: Brent Plunges, Stocks Surge As US, Iran Agree Ceasefire
In Asia, Japan’s Nikkei jumped about 5% while South Korea’s KOSPI vaulted 6%, triggering a brief halt in trading. That left the MSCI’s broadest index of Asia-Pacific shares outside Japan up 4%.
Seoul jumped 6.9 per cent and Tokyo 5.4 per cent, while Taipei added more than four per cent and Mumbai 3.8 per cent.
Hong Kong advanced nearly three percent, while Sydney, Shanghai, Bangkok, Manila, Jakarta, Singapore, and Wellington were also sharply higher.
Trump had threatened Tuesday that if Hormuz was not reopened, “a whole civilization will die tonight, never to be brought back again”. That came after he vowed to bomb bridges, power plants, and other civilian infrastructure in Iran.
Iran warned it would deprive the United States and its allies of oil and gas “for years” if he did so.
However, as the world counted down to the cutoff, the US president took to social media to say: “Subject to the Islamic Republic of Iran agreeing to the COMPLETE, IMMEDIATE, and SAFE OPENING of the Strait of Hormuz, I agree to suspend the bombing and attack of Iran for a period of two weeks.”
He added that it “will be a double sided CEASEFIRE!” and that “we have already met and exceeded all Military objectives, and are very far along with a definitive Agreement concerning Longterm PEACE with Iran, and PEACE in the Middle East”.
He later said on Truth Social that the United States would help with the traffic buildup in the Strait of Hormuz, adding, “There will be lots of positive action! Big money will be made. Iran can start the reconstruction process.”
Prime Minister Shehbaz Sharif of Pakistan, who has played a key mediator role, said the ceasefire would start immediately.
He said the United States “along with their allies” had agreed to a ceasefire everywhere, including Lebanon, implying that Israel had agreed to halt its invasion of its northern neighbour.
However, Tel Aviv said it supported the suspension of the bombing of Iran, but maintained the ceasefire did not include Lebanon.
