Donald Trump’s announcement of a two-week ceasefire with Iran sent global oil markets into their biggest single-day fall since the pandemic. Brent crude dropped around 13 per cent to about US$95 a barrel, WTI fell more than 16 per cent. Iran agreed to safe passage through the Strait of Hormuz in exchange for a pause in US strikes. The question for every independent operator: how quickly does this flow through to the pump, and what do we do about it now?
The honest answer is not straight away, and not in a straight line. A ceasefire takes time to flow through supply chains. Prices will only begin dropping over the coming months as fuel companies sell out of their more expensive stock. And the ceasefire itself is fragile. Global energy supply will continue to be disrupted for some time regardless of what happens in the next two weeks.
Three things are holding pump prices up. Wartime cargo is already in the system and needs to sell through. Even if the Strait reopens fully, it will take weeks to clear the backlog of 187 stranded tankers in the Gulf and months to return shipping to pre-conflict volumes. And diesel, the fuel your commercial customers care about most, moves more slowly than petrol because of contract pricing and commercial demand dynamics.
There is also the question of whether the ceasefire holds. It is a two-week pause, not a peace deal. Within hours of the announcement, Israeli strikes on Lebanon had already raised questions about the truce. Oil markets are now pricing in a best case scenario. If negotiations collapse, the oil price bounces back and any confidence in falling pump prices evaporates.
For operators, this creates a genuinely tricky pricing environment. Drivers will see the oil price headlines and expect the board price to follow immediately. But operators who drop too fast risk selling through expensive stock at a loss, and if the ceasefire breaks down, those same operators will be caught short when replacement costs stay high. The safest position is to price off your actual landed cost, communicate clearly with customers, and resist matching competitors who may be working off a different cost base.
There is also a question worth sitting with: even if your prices do come down, will it actually stop the panic buying? The last six weeks have changed the way a lot of drivers think about fuel. Customers who used to fill up once a week are now topping up every second day. Falling oil prices are welcome, but behavioural patterns formed during a crisis do not always unwind at the same speed the crisis does. If the ceasefire is seen as fragile, customers may well keep filling up defensively even as prices ease. The risk is the worst of both worlds: compressed margins on higher volumes, with all the operational strain of crisis trading but without the pricing power to absorb it.
The direction of travel is positive for the first time in weeks. If the ceasefire holds and the Strait reopens in earnest, wholesale prices should ease over the coming weeks and retail prices follow over the coming months. The excise cut running until 30 June gives operators and consumers a buffer. But there is no switch to flip. The unwinding of this crisis will be gradual, bumpy, and contingent on political events thousands of kilometres away. Plan accordingly.