Oil prices dropped hard Wednesday morning, with U.S. crude falling to $94.55 a barrel, after a sudden diplomatic breakthrough eased fears of a major supply disruption in the Middle East. Even so, drivers are still paying up — the AAA national average for gas is $4.164 a gallon, reflecting the recent run-up in energy costs.

The selloff came after the U.S. and Iran agreed to a two-week pause in hostilities, along with a commitment from Tehran to allow safe passage through the Strait of Hormuz, one of the world’s most critical oil chokepoints.

The deal landed just hours before a U.S. deadline, calming markets that had been bracing for the worst.

Crude futures reacted fast. U.S. oil sank more than 16%, while Brent crude dropped nearly 14%, CNBC reports. Still, analysts say the bigger picture hasn’t changed all that much.

Bank of America’s Francisco Blanch pointed out that the physical oil market remains tight, meaning supply is still constrained even if prices are pulling back.

Looking ahead, the short-term outlook is still shaky. If the ceasefire holds and more oil flows freely, prices could settle around current levels or drift lower. But any new disruption—especially in the Strait—could quickly send crude back up toward recent highs.

All of this ties directly into inflation. Higher oil and fuel costs have already been feeding into broader price pressures, especially for transportation and goods. While the latest drop in crude could help, it may take time before that shows up at the pump.

For the stock market, it’s a mixed bag. Lower oil prices can ease inflation and support consumers, which is generally good for equities.

But the volatility—and the geopolitical risk behind it—keeps investors on edge, especially in energy stocks.

Bottom line: oil at $94.55 a barrel is a step down, but the market is still on a hair trigger, with geopolitics, inflation, and energy prices all tightly linked.