Oil prices dropped dramatically yesterday after a ceasefire was agreed between Israel and Iran, putting a pause to 12 days of tension in the Middle East.
Brent Crude, which surged sharply after the war gained traction, has dropped below $70, selling between $67 and $68 as of yesterday.
The State of Israel and Iran have been engaged in conflict, with both countries firing missiles and targeting key installations.
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The United States joined the fray last week by launching an attack on Iranian nuclear facilities; the onslaught, which the US President described as successful.
Similarly, Iran retaliated by attacking US bases in Iraq as the conflict raged.
However, in a dramatic turn of events, Trump on Monday announced a ceasefire between Israel and Iran.
Trump said both countries had agreed to halt hostilities within a 24-hour framework, beginning with Iran.
He described the agreement as a major diplomatic breakthrough aimed at averting further destruction in the Middle East.
According to the U.S. President, the truce would begin once both nations complete their final operations, with Iran expected to commence its part in the first 12 hours and Israel in the next 12.
"At the end of the 24-hour window, the war would be officially declared over", Trump, a key supporter of Israel in the war, stated.
He said, "This is a war that could have gone on for years and destroyed the entire Middle East, but it didn't, and never will".
Oil prices sink
Oil prices sank 3.5 per cent on Tuesday after Israel said it had agreed to US President Donald Trump's proposal for a bilateral ceasefire with Iran.
Shares in Asia were buoyant, as fears of an energy market shock eased following 12 days of war between Israel and its arch-foe. In Europe, London, Paris and Frankfurt also rose at the open.
As of the close of work yesterday, Brent Crude has dropped $67.57 per barrel as investors continue to monitor the development as the ceasefire holds.
Why it matters to Nigeria
Nigeria, being a major oil producing nation and a major player in the global oil and gas supply value chain, is often vulnerable to any shock in the global oil market.
The recent rise in crude oil prices was described as a relief for Nigeria in its determination to implement the 2025 budget benchmarked at $75 per barrel.
At the beginning of the war, the oil prices surged above $80 per barrel, which contributed to strengthening the naira and improving the foreign reserve.
On the flipside, it also led to an increase in the prices of premium motor spirit (PMS), otherwise known as petroleum, in the domestic market.
Local refiners, especially Dangote Refinery, hiked the ex-depot price in response to the surging global oil prices.
Retail marketers also followed suit by jacking up their pump prices with a litre of fuel now sold for N925 per litre at filling stations in Lagos and N945 in Abuja.
Analysts at Comercio Partners had earlier warned athat the escalating tensions between Israel and Iran might affect global crude oil supply, which could impact Nigeria's economy negatively.
In their May Macro Report titled "Nigeria's Inflation Slows in May, But Trouble May Be Ahead", published on June 16th, 2025, they said the geopolitical standoff could create fresh supply shocks that may drive up global oil prices.
While Nigeria is an oil-producing nation, the report cautioned that such price surges may not necessarily benefit the country.
"For Nigeria, where fuel prices are no longer subsidised and are now tied to international benchmarks, such developments carry serious economic implications," the analysts noted.
According to the report, despite the presence of the Dangote Refinery, the country is still exposed.
"Crude remains the primary input, and higher international oil prices translate into more expensive production and distribution," the report said.
A surge in international crude prices would therefore raise production and distribution costs.
"If oil becomes more expensive, the price of petrol in Nigeria--currently around N825 per litre--could rise to N1,000," they projected.
Challenges ahead
For Nigeria, things are not looking good with the drop in oil prices, as the 2025 budget was benchmarked at $75 per barrel and a production volume of 2.2m barrels per day.
While crude oil prices are projected to fall with the current ceasefire, Nigeria is also confronted with the challenge of reduced oil production volume, which the federal government now puts at 1.2 million.
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, on Monday acknowledged that oil revenue performance remains below target due to underwhelming crude oil production and global price fluctuations.
"We're not where we expected to be on oil output, which is at 1.2mpd. However, every effort is being made to raise production, but this has had an impact on short-term revenue projections and debt service funding," he said.
Nigeria remains vulnerable - Analyst
Oil and gas analyst and economist, Dr. Marcel Okeke, in a chat with our correspondent, stated that Nigeria still remains vulnerable irrespective of the global oil market dynamics.
He stated that the Israel-Iran situation is still unfolding.
He said, "The other time, oil prices went up, but as we speak, it came down because of the ceasefire. So you don't know what will happen tomorrow (today), whether the pronouncement by Donald Trump or action on both sides. That is why we can't predict anything yet.
But however it goes, we would be affected. If the price of oil goes up, that becomes a windfall for us and then we have the problem of refined products.
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"Also, the volume of our production is a matter of concern. We are not meeting the OPEC quota given to us and it is still very low. So, nothing is clear at the moment because we can't say the battle is over."
Okeke said Nigeria, being part of the global player, may not be able to hedge against the unfolding market disruption in the oil and gas market.
"The only thing we can do is that if we secure our place, tackling insecurity, we can now diversify our economy so that we don't depend so much on oil again. If we have other options, some of the things we can export to have the much needed dollars, that would go a long way," he added.
...Naira falls to $1549
Amidst the ongoing development in the oil and gas market, the naira fell against the US dollar to N1549, according to data from the Central Bank of Nigeria (CBN) foreign exchange platform.
The Nigerian local currency experienced a mild demand shock amidst FX intervention slowdown, with transactions consummated between N1547.50 and N1550.50 per dollar before closing at N1549.03.
Daily Trust reports that the local currency further traded at over N1,600 at the unofficial market over demand pressure.
In its daily financial update, AIICO Capitals said, "Oil fell ~5% as ceasefire hopes between Israel and Iran eased supply fears, though fresh U.S. accusations revived tension. Brent dropped to $68.19. Gold sank 1.6% to $3,313.63 amid fading safe-haven demand."
