Investing.com — Oil prices fell on Tuesday, as market participants piled into equities in a euphoric relief rally following a renewed boost to Middle East de-escalation hopes.
Sentiment was lifted by a report that President Donald Trump was considering ending military operations against Iran and comments from the Iranian president indicating that the country was “prepared to end” the war if security guarantees were offered.
At 15:27 ET (19:27 GMT), , slipped 2.5% to $104.75 a barrel, while dipped 0.6% to $102.27 a barrel.
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Trump mulls ending Iran campaign without reopening Strait of Hormuz
Oil prices initially jumped on Tuesday after a Kuwaiti oil tanker was set ablaze in the Dubai port area, with the ship’s owner saying it was caused by an Iranian attack.
But prices moderated slightly on a Wall Street Journal report that Trump told aides he is willing to end the military campaign against Iran without reopening the Strait of Hormuz. Trump and his aides assessed that a mission to reopen the critical strait would take much longer than his initial four-to-six week timeline for the Iran conflict, the WSJ reported.
He decided that the U.S. would wind down operations against Iran after achieving its main goals of hobbling Iran’s navy and missile capabilities. Washington will then pressure Tehran diplomatically to reopen the Strait, and may even press European and Gulf allies to take point of the reopening, the WSJ said.
Oil prices turned sharply lower later in the session after Iran’s state TV said the country was prepared to end the war if given guarantees against further attacks, quoting president Masoud Pezeshkian.
A de-escalation in U.S. operations in the Iran could herald some progress in the conflict, especially given that Tehran has called for such a move before any direct negotiations with Washington.
But an extended closure of the Strait of Hormuz is likely to continue disrupting global supplies, given that roughly 20% of the world’s oil supply flows through the strait.
Trump tells countries to ’just take’ the strait
Trump on Tuesday called on countries unable to get jet fuel because of the Strait of Hormuz’s closure to “number 1, buy from the U.S., we have plenty, and Number 2, build up some delayed courage, go to the Strait, and just TAKE IT.”
“You’ll have to start learning how to fight for yourself, the U.S.A. won’t be there to help you anymore, just like you weren’t there for us,” the president added.
U.S. Secretary of War Pete Hegseth later reiterated Trump’s remarks at a press conference.
“There are countries around the world who ought to be prepared to step up on this critical waterway as well,” Hegseth told reporters, adding that there were “many more vessels” flowing through the strait than before.
“On a positive note, Iranian leaders have signaled a willingness to consider ending the conflict, which has sparked some cautious optimism. However, much of the market’s focus remains fixed on the status of the Strait of Hormuz, as uncertainty persists over how soon this vital shipping lane might reopen,” Ed Egilinsky, managing director and head of global sales/distribution & alternatives at Direxion, told Investing.com.
“While today’s equity markets have responded with renewed confidence, oil prices themselves have shown only a modest decline. Given the current circumstances—and the relatively muted reaction from oil prices to the latest developments—it is reasonable to anticipate that oil will maintain an elevated risk premium for the foreseeable future,” Egilinsky added.
Brent set for record gains in March
The ongoing Middle East conflict has created the largest oil supply disruption in history, and contributing to massive monthly gains for oil prices.
Brent, the global benchmark, was on track for a whopping 43.8% advance in March, the biggest on record according to Investing.com data stretching back to July 1988. Meanwhile, WTI was set for a March climb of 52.6%, its best performance since May 2020.
Iran’s effective blockage of the Strait of Hormuz and attacks on oil tankers and infrastructure in nearby Persian Gulf countries has sparked concerns of prolonged supply disruptions in crude. Several Gulf countries halted oil production and shipments due to the conflict in the past month.
A host of contrasting signals on the conflict also aided crude prices. Iranian officials largely maintained that they had not engaged in any direct negotiations with the U.S. since the onset of the war, contradicting claims from Washington that talks were going well.
The U.S. has reportedly deployed thousands of troops to the Middle East, with Trump repeating his threats of attacking the country’s energy and potentially water infrastructure should the Strait of Hormuz not be reopened by April 6.
Attempts at brokering peace continued, with Pakistan offering to host regional ceasefire talks in Islamabad.
Yemen’s Houthi group entered the conflict over the weekend, attacking Israel and sparking concerns over a new front in the war, given the group’s capacity to attack ships passing through the Red Sea.
Ambar Warrick and Scott Kanowsky contributed to this article