Oil prices experienced a decline during Asian trading on Tuesday, reversing previous gains, after reports surfaced that U.S. President Donald Trump has expressed a willingness to conclude the military engagement with Iran without initially reopening the Strait of Hormuz.
Brent crude futures for May delivery fell by $1.22, or 1.08%, settling at $111.56 per barrel at 0210 GMT, following an earlier increase of 2% earlier in the session. The May contract is set to expire on Tuesday, while the more actively traded June contract was priced at $105.76.
Meanwhile, U.S. West Texas Intermediate (WTI) futures for May decreased by 98 cents, or 0.95%, to $101.90 per barrel, having reached their highest level since early March during initial trading.
Market analysts suggested that the price decline is a short-term reaction to the potential end of the conflict, cautioning that substantial price changes will only occur once oil flows through the Strait of Hormuz are fully restored.
According to a report by The Wall Street Journal on Monday, Trump mentioned to his aides that he would be open to ending military operations against Iran, even if the Strait of Hormuz remains predominantly closed, deferring its reopening for a later time. On the same day, Trump issued a stark warning that the U.S. would “obliterate” Iranian energy facilities and oil wells if Tehran does not facilitate the reopening of the waterway.
The effective blockade of the Strait of Hormuz by Iran, through which about 20% of the world’s oil supply and numerous liquefied natural gas carriers typically pass, has led to Brent futures rising 59% in March, marking their most significant monthly increase ever. Similarly, WTI futures have increased by 58% this month, the largest rise since May 2020.
Sugandha Sachdeva, the founder of SS WealthStreet, a research firm based in New Delhi, noted, “While diplomatic communications remain inconsistent, the reality on the ground indicates that uncertainty is likely to endure.” She added that even with a reduction in hostilities, the time required to restore damaged infrastructure would keep supply limited.
In a recent development highlighting the risks to maritime energy supplies due to the ongoing conflict between Iran, the U.S., and Israel, Kuwait Petroleum Corporation reported on Tuesday that its crude oil tanker Al Salmi, which has a capacity of 2 million barrels, was hit by what is believed to be an Iranian attack at a port in Dubai. Officials also raised concerns about the possibility of oil spills in the vicinity.
Additionally, Yemen’s Iran-aligned Houthi forces targeted Israel with missiles over the weekend, intensifying worries about potential disruptions to the Bab el-Mandeb Strait, a critical passage connecting the Red Sea to the Gulf of Aden and a vital route for maritime traffic between Asia and Europe via the Suez Canal.
In response to these tensions, Saudi crude exports have been diverted through this route, with shipments rerouted from the Gulf to the Red Sea port of Yanbu reaching an impressive 4.658 million barrels per day last week, according to Kpler data. This marks a significant increase from an average of 770,000 bpd in January and February.
On the domestic front, a preliminary Reuters poll conducted on Monday indicated that U.S. crude oil inventories were likely to have decreased in the past week, along with distillate and gasoline stocks.
Vandana Hari, the founder of oil market analysis firm Vanda Insights, commented, “Conflicting statements and signals regarding the war’s status are rampant, and the truth has become one of the main casualties in this situation.”
