The Commodities Feed: Oil slumps below $100 after US, Iran agree to two-week ceasefire

Oil prices plunged below $100/bbl after the US and Iran agreed to a two‑week ceasefire, easing fears of prolonged supply disruption. Brent fell as much as 16% before trading around $94/bbl, while WTI recorded its steepest drop in almost six years, last trading near $96/bbl.

The ceasefire is expected to halt the US‑Israeli military campaign in exchange for Tehran reopening the Strait of Hormuz. The proposed framework reportedly allows Iran and Oman to levy transit fees on vessels passing through the strait.

Further price direction will hinge on whether talks translate into a durable agreement and a sustained normalisation of flows through the strait, with volatility likely to persist during negotiations later this week.

Refined product prices followed crude lower. European diesel futures fell as much as 23%, marking their largest decline in more than four years, while futures linked to Abu Dhabi’s Murban crude dropped 19% – the sharpest fall since the contract’s launch in 2021.

US inventory data added to the bearish tone. The API reported a 3.7mb build in US crude stocks last week, well above expectations for a 0.78mb increase. In contrast, refined product balances were more supportive, with gasoline and distillate inventories falling by 4.0mb and 0.6mb, respectively. The EIA inventory report is due later today.

The EIA has trimmed its medium‑term US supply outlook. In its latest Short‑Term Energy Outlook, the agency lowered its 2026 US crude production forecast to 13.51mb/d, from 13.61mb/d previously, but expects output to rebound to 13.95mb/d in 2027 amid a higher price environment and continued Middle East disruptions. US petroleum consumption is expected to be broadly flat at around 20.6mb/d this year and 20.7mb/d in 2027.

OPEC supply fell sharply in March, according to preliminary Bloomberg survey data, with production down by around 7.6mb/d month‑on‑month to a multi‑decade low of 22.1mb/d, reflecting war‑related disruptions and curtailed exports through the Strait of Hormuz.

Iraq posted the largest decline, with output falling by 2.8mb/d to 1.6mb/d. Saudi Arabia’s production dropped by 2.1mb/d to 8.4mb/d, while UAE output fell by 1.4mb/d to 2.2mb/d, partly cushioned by pipeline routes bypassing the strait. Reopening the Strait of Hormuz could allow some lost production to return in the coming weeks, though a full normalisation will be gradual.

Gold climbed above $4,850/oz after the US and Iran agreed to a two‑week ceasefire, including the reopening of the Strait of Hormuz, easing immediate geopolitical tail risks. The move reflected a broader improvement in risk appetite, extending across precious and industrial metals.

Despite the rebound, gold remains around 11% below late‑February highs, following forced liquidation during the escalation in Middle East tensions, which temporarily weakened its safe‑haven appeal. Sentiment, however, is showing tentative signs of stabilisation.

In industrial metals, copper climbed to a three‑week high as risk appetite rebounded and fears of severe supply disruptions eased. Relief around shipping routes has been particularly supportive for sentiment, with the ability of vessels to transit the Strait of Hormuz especially critical for aluminium – the region accounts for around 10% of global aluminium supply.

Looking ahead, metals prices will be shaped by whether the ceasefire evolves into a more durable agreement, alongside US monetary‑policy expectations, with Federal Reserve communication, inflation data and real‑yield dynamics key near‑term drivers.

Robusta coffee extended its decline, falling for a second consecutive day. It traded to its lowest level since March 2024, driven by higher shipments from Vietnam and growing expectations of global surplus. Recent estimates from Vietnam’s General Statistics Office indicated that March coffee exports totalled 217kt, up 13.3% YoY, while first-quarter shipments rose 14% YoY to 585kt. Looking ahead, Vietnam’s coffee output for 2025/26 could rise by around 5-10%, compared to 1.8mt recorded in the 2024/25 season. Sentiment has also weakened on forecasts of a sizeable surplus in the 2026/27 season, as Brazil moves towards a record harvest.

The Indian Sugar Mills Association (ISMA) has trimmed its 2025/26 gross sugar production estimate to 32mt, including volumes diverted to ethanol, due to lower yields in key producing regions. This is down from the earlier projection of 32.4mt. Domestic sugar consumption is now expected to reach 27.7mt, down from an earlier estimate of 28.1mt, as LPG shortages and cooler weather dampen demand. Meanwhile, exports are projected at 800kt for 2025/26.

Meanwhile, the Food and Secretary Ministry of India clarified that the nation does not plan to impose a ban on sugar exports. Instead, surplus could be redirected to ethanol production to offset oil disruptions linked to the Middle East tensions. The government is also reviewing the industry’s proposal to raise the minimum selling price.