Oil prices have plummeted after Iran said the Strait of Hormuz would be "completely open" to commercial ships for the remainder of the ceasefire.

The cost of a barrel of Brent crude fell to $88 dollars a barrel, having been above $98 earlier on Friday.

The Strait of Hormuz is a narrow strip of water linking the Gulf to the Arabian sea, through which a fifth of the world`s oil and liquified natural gas is typically transported.

"The passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire," Iranian Foreign Minister Abbas Araghchi said.

Global markets also rallied on the announcement, with the major US stock indices rising in early trading. The S&P 500 rose by 0.8%, while the Nasdaq and Dow Jones Industrial Average (DJIA) were both up by more than 1%.

European shares also rose in reaction to the news. The Cac index in Paris and Dax in Frankfurt both climbed by more than 2%, while London`s FTSE 100 rose by around 0.5%.

The Strait of Hormuz has been effectively shut by Iran since the US and Israel launched military strikes in the country in late February.

Tankers have been unable to pass through, drastically reducing the amount of oil and gas available on global markets and causing prices to spike.

Before the conflict, Brent crude was trading at under $70 per barrel. It rose above $100 before reaching a peak of more than $119 per barrel in March.

Sharp rises in the price of oil have pushed up the price of petrol and diesel for drivers, as well as sparking concerns over the supply of jet fuel, leading to fears airlines will have to ground flights.

The closure of the key waterway has also cut off a major supply line of fertiliser, used by farmers, raising the prospect of higher food prices as a result of the conflict.

A third of the world`s key fertiliser chemicals pass through the Strait, and prices have risen steeply since the outbreak of war.

However, hours before Araghchi`s statement, motoring group the RAC said petrol and diesel prices had fallen slightly in the UK for the first time since the US-Israel war with Iran began.

Pump prices began to ease on Thursday and continued on Friday, it said, though it remains far more expensive to fill up a tank than it did in February.

Iran`s decision to re-open the Strait of Hormuz followed a ceasefire agreement between Israel and Lebanon.

US President Donald Trump welcomed the move, writing on Truth Social: "IRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE. THANK YOU!"

Trump added that Iran had agreed "to never close the Strait of Hormuz again... it will no longer be used as a weapon against the world".

But, in a follow up post, he said a naval blockade of Iran will remain "in full force and effect" until a permanent deal to end the US-Israel war with the country is agreed.

Despite Iran`s announcement, one oil and gas shipping operator told the BBC it "doesn`t change anything" immediately.

"We don`t feel like we need to be taking unnecessary risks and our company approach is that we won`t be the first to go through the Strait", the operator, who did not want to be named, said.

Another company, Stena Bulk, which operates oil tankers in the region, said it was "monitoring developments closely".

"The safety of our crew and vessels governs every routing decision, and we will not transit until we are satisfied it is safe to do so", the company added.

Source: BBC