WTI crude and Brent oil fell more than 5% and 4.8% respectively on Tuesday after an Iran-Israel ceasefire reduced geopolitical risk premiums, while China's crude imports hit an eight-year low and Hormuz traffic showed signs of recovery.

Key Highlights

  • WTI crude fell more than 5% to approximately $86 per barrel, its lowest close since April 17.
  • Brent dropped nearly 4.9% to around $89.74, tracking the broader de-escalation in the Middle East.
  • An Iran-Israel ceasefire agreement and renewed US-Iran diplomatic talks drove the risk premium lower.
  • China's crude imports fell to 7.8 million barrels per day, the lowest level in more than eight years.
  • JPMorgan estimates up to 2 million barrels per day may still be transiting Hormuz on vessels with disabled transponders.

Ceasefire Resets the Risk Calculus

Oil prices dropped sharply on Tuesday, with WTI crude falling more than 5% to approximately $86 per barrel and Brent losing nearly 4.9% to around $89.74. Both benchmarks hit their lowest levels since mid-April as markets unwound the geopolitical risk premium built up since late February.

The catalyst was a halt in hostilities between Israel and Iran. Israeli Prime Minister Benjamin Netanyahu confirmed Israel would pause its strikes, while retaining the right to respond to further aggression. Iranian state media signalled a similar position from Tehran. The exchange of fire earlier in the week had briefly pushed prices higher on Monday, but the volley ended without further escalation and the ceasefire held.

President Donald Trump stated that nuclear negotiations with Iran were in their final stage and that a resolution could emerge within days. Trump has made similar remarks repeatedly without a formal agreement materialising, leaving traders cautious about pricing in a durable settlement. Nevertheless, the combination of a ceasefire and improving conditions at the Strait of Hormuz was sufficient to push both benchmarks to multi-week lows in a single session.

Hormuz: More Oil Moving Than Data Shows

US Energy Secretary Chris Wright told on Tuesday that ship traffic through the Strait of Hormuz was rising meaningfully and would continue to rise. He did not provide specific Volume figures.

The Strait has been effectively closed to normal commercial shipping since Iran retaliated against a US-Israeli military operation in late February by attacking tankers and Mining the sea lane. The disruption has been described by analysts as the largest single oil Supply shock in recorded history, with crude prices rising roughly 30% since the conflict began.

However, the actual volume loss may be smaller than headline figures suggest. JPMorgan analysts estimated in a note that approximately 2 million barrels per day could be transiting Hormuz on vessels that have switched off their transponders. The US Navy has also quietly coordinated passage support for some vessels attempting to exit the Persian Gulf. If confirmed, the hidden flow helps explain why crude prices, while elevated, have stayed below the levels a full closure would ordinarily imply.

China Imports and the Demand Overhang

The price decline was reinforced by demand data from China. Crude imports fell to approximately 7.8 million barrels per day last month, the lowest reading in more than eight years and nearly 4 million barrels per day below the 2025 average. Slowing industrial output, a growing domestic clean energy base, and the residual effects of trade friction with the United States all contributed to the weakness.

China's Import contraction, alongside record US crude exports and coordinated strategic reserve releases from major consuming nations, has effectively capped the price impact of the Hormuz disruption throughout the conflict. The buffer remains in place for now, though analysts warn that global stockpiles are declining rapidly. If the Hormuz situation remains unresolved into the summer peak demand period, the inventory cushion may not hold, and prices could reprice sharply higher.

Conclusion

Oil's more than 5% decline on Tuesday reflected a rapid repricing of geopolitical risk as the Iran-Israel ceasefire took hold and evidence of recovering Hormuz traffic emerged. Structural demand weakness from China and ample near-term inventory cover added to the selling pressure. Both benchmarks remain above pre-conflict levels, and the medium-term outlook hinges on whether diplomatic progress translates into a verified and durable resolution at the Strait.