Oil fell below $100 per barrel on Wednesday after US President Donald Trump said he had agreed to a two-week ceasefire with Iran that was subject to the immediate and safe reopening of the Strait of Hormuz.
Brent futures fell $14.51, or 13.3%, to $94.76 a barrel at 0330 GMT, while WTI slid $17.16, or 15.2%, to $95.79 a barrel.
Trump's turnaround came shortly before his deadline for Iran to open the Strait of Hormuz, where 20% of the world’s oil transits, or face widespread attacks on its civilian infrastructure.
"This will be a double sided CEASEFIRE!" he wrote on social media, after posting earlier on Tuesday that "a whole civilization will die tonight" if his demands were not met.
Iran said it would halt its attacks if attacks against it stopped and that safe transit through the Strait of Hormuz would be possible for two weeks in coordination with Iranian armed forces, according to a statement by Foreign Minister Abbas Araqchi on Wednesday.
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However, multiple Gulf states have identified missile launches and drone attacks or issued warnings to civilians to take shelter.
"Even with a peace deal, Iran may be emboldened to threaten the Strait of Hormuz more frequently in the future, and the market will price in heightened risk to the Strait of Hormuz going forward," MST Marquee analyst Saul Kavonic said.
The US-Israeli war with Iran saw the steepest monthly oil price rise in history in March of more than 50%.
"There is still scope for a significant geopolitical premium being entrenched for the foreseeable future based on the details of the comprehensive agreement," said Commonwealth Bank analyst Vivek Dhar in a note.
Trump said the US had received a 10-point proposal from Iran which he called a workable basis to negotiate and said the parties were very far along on reaching a definitive agreement for long-term peace.
"It's a good start and could pave the way to a more permanent reopening - but lots of ifs still to work out," IG analyst Tony Sycamore said.
WTI has maintained its price premium over Brent in a reversal of typical price patterns due to its delivery contract being for May while Brent is for June, reflecting that barrels with an earlier delivery date are commanding a higher price.
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