Oil and gas prices fall nearly 10% after Iran says strait of Hormuz is open

Oil and gas prices tumbled by almost 10% on Friday after Iran said the strait of Hormuz would open to commercial shipping, potentially clearing the way for tankers holding millions of barrels of oil and gas to reach the global market.

Iran’s foreign minister said vessels would be free to transit the strait of Hormuz for the duration of the 10-day ceasefire between Israel and Lebanon struck on Thursday.

Brent crude, the international benchmark, fell 9% to $90 a barrel.

Donald Trump later said the US naval blockade on Iran’s use of the strait would remain in full force until Washington had struck a deal with Tehran. He said the process “should go very quickly” because “most of the points are already negotiated”.

The benchmark European gas contract fell by about 8.5% to €38.80 (£33.80) per megawatt hour on hopes that diplomatic progress between the US and Iran could bring an end to the conflict.

Tehran’s chokehold on the strait of Hormuz since US-Israeli attacks on Iran began seven weeks ago has disrupted supplies of Middle Eastern crude and gas as well as refined fuels from Gulf refineries, in what the International Energy Agency has described as the biggest energy supply crisis in history.

Oil and gas prices had already begun to slide after Trump said on Thursday that Israel had agreed a ceasefire with Lebanon in a big step forward for the US peace talks with Iran. “We’re going to see what happens. But I think we’re very close to making a deal with Iran,” Trump told reporters outside the White House on Thursday.

The progress is the clearest sign yet that oil and gas flows could begin to return to normal. However, big questions remain over whether the ceasefire will hold for long enough for tankers stranded in the Gulf to move through the strait and whether shipping companies will be willing to risk a transit.

Before the crisis, more than 130 ships a day travelled through the strait, but this has reduced to a trickle under threats from Iran’s Revolutionary Guards. There remain about 800 tankers stuck in the Gulf, of which about 300 are oil and gas tankers.

In a statement on social media, Iran’s foreign minister, Abbas Araghchi, said tankers must follow the same route through the narrow waterway to the south of Iran nicknamed the “Tehran tollbooth”, so called because the small number of tankers granted permission to pass through in recent weeks have been required to pay Iran about $2m (£1.5m) for safe passage.

It is unclear whether tankers will be required to pay this fee or how quickly those willing to make the transit will be able to do so.