SINGAPORE – Oil prices were little changed on Tuesday as investors weighed the possibility of US President Donald Trump ending the military campaign against Iran against the risk of sustained supply shocks from a prolonged closure of the Strait of Hormuz, a critical artery for global oil flows.
Brent crude futures for May were up 18 cents, or 0.16 percent, to $112.96 per barrel at 0438 GMT after dropping one percent earlier in the session. The May contract expires on Tuesday, while the more active June contract was at $107.10. Meanwhile, US West Texas Intermediate futures for May fell 25 cents, or 0.24 percent, to $102.63 a barrel after hitting their highest point since March 9 in early trading.
Trump Sends Mixed Signals on Iran Campaign
According to a report by The Wall Street Journal on Monday citing administration officials, Trump told aides he is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed, leaving its reopening for a later date. However, just a day earlier, Trump had warned that the United States would obliterate Iran’s energy plants and oil wells if Tehran did not reopen the waterway. The conflicting signals have kept markets on edge.
Analysts said the modest fall in prices is a temporary reaction to the idea of the war ending, but any meaningful change in prices would not materialize until flows through the Strait of Hormuz are completely reinstated. The strait typically carries about a fifth of the global oil supply and large numbers of liquefied natural gas tankers. Iran’s effective closure of the waterway has already pushed Brent futures up 59 percent so far in March, their highest monthly gain ever, while WTI is up 58 percent this month, the most since May 2020.
Ground Reality Suggests Uncertainty Will Persist
Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm, noted that while diplomatic signals remain mixed, the ground reality suggests that uncertainty will persist. “Even in the event of de-escalation, restoring damaged infrastructure will take time, keeping supply tight,” she said.
Highlighting the ongoing threat to seaborne energy supplies from the war between Iran and the United States and Israel, Kuwait Petroleum Corp announced on Tuesday that its fully loaded crude oil tanker Al Salmi, capable of carrying up to two million barrels, was struck by an alleged Iranian attack at a Dubai port. Officials also warned of potential oil spills in the area, adding to environmental and navigational hazards.
Houthi Attacks Raise Concerns Over Second Chokepoint
On Saturday, Yemen’s Iran-aligned Houthi forces targeted Israel with missiles, raising fresh concerns about possible disruptions to the Bab el-Mandeb Strait, the chokepoint linking the Red Sea and the Gulf of Aden. That passage is a key route for ships moving between Asia and Europe via the Suez Canal. Saudi crude exports have already been rerouted through this passage, with volumes redirected from the Gulf to the Red Sea port of Yanbu reaching 4.658 million barrels per day last week, according to Kpler data — a sharp rise from an average of just 770,000 barrels per day in January and February.
Physical Oil Shortages Drawing Closer
Lin Ye, a vice president for commodities markets and oil at Rystad Energy, warned that with the oil market’s remaining buffers gradually being consumed, the market’s vulnerability to a prolonged closure of the strait means the world is moving closer to physical oil shortages across a wider geographic scope.
“The upward momentum for oil prices is likely to strengthen further,” she said.
Meanwhile, in the United States, crude oil stockpiles were expected to have fallen last week, along with distillate and gasoline inventories, according to a preliminary Reuters poll released on Monday. Tightening domestic supplies could add further upward pressure to global prices if the Strait of Hormuz remains blocked.
As diplomatic efforts continue to produce mixed signals, the oil market remains trapped between the hope of de-escalation and the reality of disrupted supply chains, damaged infrastructure, and escalating attacks on tankers — a combination that analysts say could drive prices even higher in the weeks ahead.
