(Investing) – Oil prices will continue to remain volatile despite falling 10-15% after the much-awaited ceasefire deal between the U.S. and Iran on Tuesday, according to Barclays.
“Oil prices are down 10-15% this morning following the two-week ceasefire in the Middle East, and we expect the oil equities to be under pressure in the short term,” analysts at Barclays said in an investor note.
The Strait of Hormuz, which was blocked by Iran during the war, typically handles about one-fifth of global oil and liquefied natural gas shipments. News of the deal and the prospect that the worst disruption to global energy markets in history could finally end caused a sharp fall in oil prices and a surge in share markets around the world.
The ceasefire halts the conflict that began on February 28, initiated by Trump and Israeli Prime Minister Benjamin Netanyahu. Their stated goals were to stop Iran from extending its influence beyond its borders, dismantle its nuclear program, and foster an environment for Iranians to overthrow their government.
Iran has indicated that safe passage through the Strait of Hormuz will be allowed for a limited two-week period, but under strict coordination with its armed forces. Analysts also flagged additional uncertainties, including potential technical limitations and the possibility of transit fees—factors that could deter key oil exporters such as Saudi Arabia and the UAE. Analysts also warned that the short time window may discourage new shipments, even as priority is likely given to vessels currently stranded in the region.
While the temporary opening could allow some blocked tankers to move, it remains unclear whether it will be sufficient to restore normal production and export levels. Market participants are expected to closely monitor the number of ships entering and leaving the strait as a key indicator of recovery.
“Two weeks is a small window. Whether ship owners will want to send a ship into the Strait when there is a possibility of being stuck for two weeks is unknown. In short, this appears a highly conditional opening of the Strait,” the report added.
Shipping firms said they would need further assurances of safety before sailing. “Any decision to transit the Strait of Hormuz will be based on continuous risk assessments, close monitoring of the security situation, and available guidance from relevant authorities and partners,” said container shipper Maersk, according to a report from Reuters.
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