Oil Prices Plunge 11% as Iran Declares Strait of Hormuz Open for Commercial Vessels
Why It Matters
The Strait of Hormuz is one of the most critical energy chokepoints in the world, and its closure had driven oil prices sharply higher, squeezing American consumers at the pump and rattling global markets. Friday’s announcement from Iran’s foreign minister offered the first major relief signal since the conflict began, sending oil prices tumbling and pushing U.S. stock indexes to record highs.
For everyday Americans, the market shift could translate directly into lower prices at the gas station as early as this weekend, analysts said.
What Happened
Iran’s Foreign Minister Abbas Araghchi announced Friday that the Strait of Hormuz was open for commercial vessels, citing alignment with a ceasefire in Lebanon. Araghchi posted the declaration on X, stating: “In line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire, on the coordinated route as already announced by Ports and Maritime Organisation of the Islamic Rep. of Iran.”
President Donald Trump quickly celebrated the announcement on Truth Social, writing: “IRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE. THANK YOU!” However, Trump followed up with a second post clarifying that the U.S. naval blockade would “remain in full force and effect as it pertains to Iran, only, until such time as our transaction with Iran is 100% complete.”
Significant uncertainty remains about the terms under which vessels will transit the strait. Araghchi’s reference to a “coordinated route” raised questions about whether ships would be required to pay Iran a toll for passage — a practice some vessels have reportedly already undertaken in recent weeks. Shipping giants Maersk and Hapag-Lloyd both responded cautiously, indicating they would not immediately resume strait transits pending further risk assessments.
By the Numbers
U.S. crude oil dropped 11.4% to $83.85 per barrel — its lowest level since March 10 — while international Brent crude fell 9% to $90.38 per barrel. Friday marked the second-largest single-day oil price drop since the conflict began.
Heating oil futures, a proxy for jet fuel, declined 10%, and wholesale RBOB gasoline futures fell 5%. The national average gas price stood at $4.09 per gallon as of Friday afternoon, according to AAA, though it had been falling incrementally throughout the week.
GasBuddy analyst Patrick De Haan projected the national average could fall below $4.00 per gallon — potentially reaching $3.65 to $3.85 — starting as early as this weekend. Despite Friday’s relief, U.S. crude oil remains 25% higher than at the start of the conflict and more than 45% higher than at the start of the year.
On equities, the S&P 500 closed up 1.2% and logged a 4.5% weekly gain. The Nasdaq rose 1.5% on the day, recording a 6.8% weekly gain. The Dow Jones Industrial Average surged 868 points, or 1.8%. All three major indexes closed at or near record highs for the third consecutive week.
Zoom Out
The Strait of Hormuz handles roughly 20% of the world’s oil supply, making it a linchpin for global energy markets. The conflict’s disruption of maritime traffic through the waterway sent shockwaves through energy and consumer markets worldwide. The U.S. military turned back six ships in the first 24 hours of the Iranian port blockade, underscoring how quickly the strait’s closure had real-world economic consequences.
European markets also rallied on the news, with Germany’s DAX rising 2.2%, France’s benchmark index gaining 2%, and the U.K.’s FTSE 100 up nearly 1%. European leaders at a summit cautiously welcomed the announcement, though EU foreign policy chief Kaja Kallas warned that any pay-for-passage scheme would set “a dangerous precedent for global maritime routes.” French President Emmanuel Macron called for a neutral party to administer the strait’s reopening, while U.K. Prime Minister Keir Starmer demanded it reopen with “no tolls and no restrictions.”
The announcement comes as markets have been closely tracking U.S.-Iran tensions. Trump had previously praised defense technology firm Palantir even as its stock suffered its worst week in over a year amid the ongoing Iran conflict.
What’s Next
The most pressing question is whether major shipping companies will resume transit through the Strait of Hormuz. Hapag-Lloyd said its crisis committee was reviewing outstanding issues — including insurance coverage and clarity on the exact sea corridor — and expected to resolve them within 24 to 36 hours of Friday’s announcement.
Maersk indicated it would continue following guidance from regional security partners before making any transit decisions. Whether Iran enforces a toll-based passage system remains unresolved, and Western leaders and international legal experts have signaled strong opposition to any such arrangement under maritime law.
Markets will be closely watching for whether oil prices continue to decline — or reverse — depending on how shipping companies, regional powers, and the Trump administration respond to Iran’s terms in the coming days.