The price of Brent crude fell by about 13% to $94.80 per barrel (p/bbl) after Wednesday morning’s announcement that Pakistani had brokered a peace deal between Iran and the United States.
After it was announced that the Strait of Hormuz will remain open for at least two weeks, the price for West Texas Intermediate also fell to a level closer to what it was at the start of the war, trading 15% lower at $95.75 p/bbl, the BBC reported.
According to Bloomberg the initial drop in oil futures were sharper.
After the ceasefire‑plus‑Hormuz‑reopening deal, Brent futures plunged roughly 15–16% in a single session, reaching a relative low of $91 p/bbl before crude settled at just over $94.
This is well below the recent of $110–$119 seen in early‑to‑mid‑March.
But it’s a tenuous peace that has settled over the Persian Gulf, especially in light of Israel saying directly after the ceasefire announcement that its war against southern Lebanon is not part of the ceasefire.
Interviewed on RSG, Dr Oscar van Heerden of the Centre for African Diplomacy and Leadership, said the ceasefire should have an immediate positive impact on global trade relations.
He added that it will be instructive to see whether or not Iran proceeds to ‘toll’ the Strait as it said it would, to recoup costs for the damages it suffered to infrastructure destroyed by US and Israeli bombardments.
Whether it will be allowed to charge for transits remains to be seen, hence the tenuous peace reported and also alluded to by Van Heerdern.
Legally, Iran’s territorial water stretches 12 kilometres from its coast line, and includes a northern third of the shallower part of the approximately 60km-wide Strait.
According to Britannica, “the bulk of the main shipping lanes lie in Omani territorial waters, with only a small portion near the Iranian coast falling inside Iran’s 12‑mile belt.”
“Everything else is either ‘high seas’ or subject to the transit‑passage regime under the United Nations Convention on the Law of the Seas (Unclos).
However, although Iran is a signatory of Unclos, it hasn’t ratified the Convention securing continuous passage through an open body of water outside the oceanic territoriality of a country.
