Oil steadies after clashes around Hormuz strain fragile truce

Oil steadied after Monday’s jump, as traders tracked the increasingly fragile four-week ceasefire in the Middle East following fresh clashes between the US and Iran.

Brent edged below $114 a barrel, after surging 5.8% on Monday. Hundreds of vessels were seen clustering near Dubai on Tuesday, as more ships moved away from a still-empty Strait of Hormuz in response to Iran’s efforts to widen its area of control. In the United Arab Emirates, an oil terminal in Fujairah was hit.

The two sides exchanged fire as the US said it had opened a passage through the waterway and CBS reported two American destroyers had crossed into the Persian Gulf.

The attacks “all point to the ceasefire fraying,” said Saul Kavonic, senior energy analyst at MST Marquee. “Oil could jump materially higher if the war resumes and especially if damage to more oil infrastructure ensues.”

President Donald Trump said the war may last another two to three weeks in comments to Salem News Channel. Defense Secretary Pete Hegseth will brief reporters at the Pentagon later Tuesday, with General Dan Caine, chairman of the Joint Chiefs of Staff.

Brent crude has rallied by more than 80% this year as the conflict deprived the market of hundreds of millions of barrels of oil. Access to the critical strait is subject to a double blockade, with Tehran seeking to prevent ships from transiting, while Washington stops Iran’s oil from reaching global markets.

Iranian Foreign Minister Abbas Araghchi said talks with Washington were “making progress” but the US and the UAE “should be wary of being dragged back into quagmire,” according to a post on X. Events in Hormuz made clear “there’s no military solution to a political crisis,” he added.

“I’m not expecting a quick reopening of bi-directional flows through the strait,” said Anoop Singh, global head of shipping research at Oil Brokerage. “The US is attempting to level the power balance in the strait, and that’s been reciprocated against by Iran. It’s escalation.”

Adding to tensions on Monday, the UAE said it intercepted Iranian cruise missiles and blamed a drone strike for a large fire at Fujairah port, a key terminal that sits outside the Persian Gulf. The Gulf state issued several missile alerts to its residents for the first time since the ceasefire between Washington and Tehran began nearly a month ago.

“Escalation seems to be the path,” said Carl Larry, oil and gas analyst at Enverus. “Peace is dimming, and what happens during an escalation is anyone’s guess, but it won’t be good.”

Spiking energy costs have fanned concerns that the conflict will stoke inflation while hurting growth. In the US Treasury market, 30-year yields climbed to the highest since July, topping 5%, as traders boosted wagers that the Federal Reserve will have to reverse course and raise rates to curb price gains.

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