Oil prices fell Tuesday after U.S. officials said the Iran ceasefire remained intact, easing fears of a wider conflict near the Strait of Hormuz.
Oil prices fell Tuesday after senior U.S. defense officials said the ceasefire with Iran remained in place despite attacks on the United Arab Emirates, calming some immediate fears that fighting in the region could return to full-scale war.
Brent crude, the international benchmark, dropped more than 2% to $111.45 a barrel by 9:17 a.m. ET, while U.S. West Texas Intermediate crude slid more than 3% to $102.65, according to the CNBC report. The decline followed a jump of more than 4% on Monday, when the ceasefire appeared at risk of unraveling.
Defense Secretary Pete Hegseth told reporters that the “ceasefire is not over,” while Gen. Dan Caine, chairman of the Joint Chiefs of Staff, said Iran’s attacks fell “below the threshold of restarting major combat operations at this point.”
Hegseth said President Donald Trump would decide whether any future action amounted to a violation. “Right now, the ceasefire certainly holds but we’re going to be watching very, very closely,” he said.
The market reaction underscored how quickly energy prices are moving around signs of military escalation or restraint near the Strait of Hormuz, a key route for global oil shipments. On Monday, Iran launched drones and missiles at the UAE, while Washington said it had sunk Iranian vessels in the strait.
The U.S. also began an operation Monday aimed at reopening the Strait of Hormuz to commercial traffic. Hegseth said two U.S. commercial ships, accompanied by U.S. destroyers, had crossed the waterway, which he described as evidence that the lane was clear. Danish shipping company Maersk said its U.S.-flagged Alliance Fairfax crossed the strait Monday under U.S. military protection.
Tensions remain elevated. Trump warned Monday in a Fox News interview that Iran would be “blown off the face of the earth” if it targeted U.S. ships protecting commercial traffic through the strait. Iranian Foreign Minister Abbas Araghchi said on social media that recent events in the strait showed “there’s no military solution to a political crisis,” adding that talks were making progress with Pakistan’s efforts.
Even with Tuesday’s pullback in prices, supply concerns have not disappeared. Goldman Sachs wrote Monday that global oil inventories are not yet critically low, but that faster drawdowns and uneven regional distribution are raising the risk of localized shortages, especially in some refined products.
Chevron CEO Mike Wirth also warned that fuel shortages were becoming a concern in some regions if constraints around the strait persisted. The next key question for markets is whether the ceasefire continues to hold and whether commercial shipping through Hormuz can normalize without further military confrontation.
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