Oil Price Slips Following Recent Surge Amid Ongoing Hormuz Strait Tensions

Middle East Tensions Weigh on Oil Prices as Brent Falls Toward $113 a Barrel

Oil prices declined on Tuesday, paring gains from the previous day, as tensions in the Middle East escalated following fresh clashes between the US and Iran. Brent crude fell toward $113 a barrel after surging 5.8% on Monday, while West Texas Intermediate was near $104.

The military fought off Iranian attacks as it guided two US-flagged vessels, the USS Truxtun and USS Mason, through the Strait of Hormuz, according to US Central Command. The vessels were supported by Apache helicopters and other aircraft and faced a series of coordinated threats during their passage. The Strait of Hormuz has been subject to a double blockade, with Tehran seeking to prevent ships from transiting, while Washington stops boats sailing to or from the Islamic Republic.

| Comparison of Oil Prices (Year-to-Date) | | --- | --- | | Brent Crude | 89.9% increase | | West Texas Intermediate | 84.2% increase |

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The waterway has been all-but-impassable, and wells have been shut-in around the region. The conflict has deprived the market of millions of barrels of oil, contributing to a nearly 90% rally in Brent crude this year.

Defense Secretary Pete Hegseth will brief reporters at the Pentagon later Tuesday, with General Dan Caine, chairman of the Joint Chiefs of Staff. Iranian Foreign Minister Abbas Araghchi said talks with Washington were "making progress" but warned that the US and the UAE "should be wary of being dragged back into quagmire."

The attacks have raised concerns that the four-week ceasefire between Washington and Tehran may be fraying. Oil prices could jump materially higher if the war resumes, especially if damage to more oil infrastructure ensues. Hundreds of vessels were seen clustering near Dubai on Tuesday, as ships moved away from the strait in response to a move by Iran to widen its so-called control zone.

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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In Asia, there are similar concerns. In the Philippines, consumer prices rose 7.2% in April from a year earlier, the fastest pace in three years, according to the local statistics authority. The Southeast Asian nation typically imports nearly all of its oil needs from the Middle East.

Adding to tensions, 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."