As of 04:10 GMT, Brent crude futures fell $1.83, or 2%, to $88.55 a barrel. U.S. West Texas Intermediate (WTI) crude declined $1.60, or 1.8%, to $86.11 a barrel.
Trump, who had previously threatened to launch a "very strong strike" against Iran, called off the planned operation on Thursday.
"While this could very well prove to be another false dawn, the market reaction was swift and decisive," IG market analyst Tony Sycamore said.
He added that despite the current pullback, as long as prices remain above support near $80 a barrel, risks remain tilted toward further gains.
The U.S. military said on social media that commercial vessels continued to transit the waterway without disruption.
"We would not rush to assume that the ceasefire will hold. Even if it does, the situation could prove fragile. Moreover, if there is no progress in nuclear negotiations, the agreement could unravel very quickly," ING analysts said.
In their view, the market could enter a decisive phase by the end of July if oil supplies have not resumed by then. In that scenario, falling inventories combined with seasonal demand growth could push prices to between $120 and $130 a barrel.
Earlier, U.S. President Donald Trump announced the launch of a large-scale humanitarian mission to evacuate foreign vessels stranded in the Strait of Hormuz. The initiative was aimed at helping civilian ships and their crews leave the conflict zone in the Middle East.
The United Arab Emirates announced its withdrawal from OPEC and OPEC+, dealing a major blow to the oil exporters' groups and their de facto leader, Saudi Arabia, as the war with Iran triggered a historic energy shock and rattled the global economy.
Iran has attacked several vessels in the Strait of Hormuz, while Trump has threatened to "wipe Tehran off the face of the Earth."
On May 12, oil prices rose nearly 1% as negotiations to end the U.S.-Israeli war against Iran remained fragile, and Tehran's response to Washington's proposal highlighted significant divisions.
On May 26, Brent crude prices rose in Asian trading after U.S. forces carried out strikes on Iran.
Oil prices fell on Tuesday, June 2, after surging in the previous session, as markets remained cautious about progress in peace talks between the United States and Iran.
On June 10, oil prices recovered some losses after falling to their lowest level in seven weeks during the previous session.