Crude oil prices fell about 4 per cent on Tuesday, as two vessels passed through the Strait of Hormuz and the United States said the ceasefire with Iran remained in place despite both sides trading fire.
Brent futures fell by $4.57 or 4 per cent to $109.87 a barrel, while the US West Texas Intermediate (WTI) crude declined by $4.15 or 3.9 per cent to $102.27 per barrel.
The Pentagon on Tuesday insisted the ceasefire with Iran was holding after the countries clashed in the waterway; US President Donald Trump characterised the attacks as a “skirmish.”
He promised to start freeing up some of the 2,000 ships stranded in the Persian Gulf, saying the effort would be a humanitarian gesture for tankers from countries not involved in the US-Iran war, prompting a threat from Tehran to stay away from the Strait of Hormuz.
Defence Secretary Pete Hegseth said the country had secured a path through the waterway, saying hundreds of ships were lining up to pass through the critical waterway. Before the US and Israel attacked Iran on February 28, about 20 per cent of global oil supplies passed through the strait daily.
The US military also said two American merchant ships made it through the strait, without saying when, with the support of Navy guided-missile destroyers.
However, Iran denied any crossings had taken place, though shipping company Maersk said the Alliance Fairfax, a US-flagged ship, passed under US military escort on Monday.
Meanwhile, the United Arab Emirates (UAE) said it was under attack from Iranian missiles and drones on Tuesday. Iran denied that it attacked the UAE in recent days.
If Iran fails to halt attacks and threats to commercial shipping in the Strait of Hormuz, the UN Security Council members could support a US- and Bahrain‑backed draft resolution that could lead to sanctions against Iran, and potentially authorise force.
Led by Saudi Arabia and Russia, the core seven members of the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed on a 188,000 barrels per day production increase for June 2026, slightly lower than the 206,000 barrels per day hikes announced for April and May, reflecting the May 1 departure of the UAE from both OPEC and OPEC+.
The American Petroleum Institute (API) estimated that crude oil inventories in the US fell by 8.1 million barrels in the week ending May 1. In the week prior, US crude oil inventories fell by 1.79 million barrels. US crude inventories are up 37 million barrels so far this year.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.