Oil prices hovered above $110 a barrel on Tuesday, as investors weighed a tanker fire near Dubai against a report that U.S. President Donald Trump was considering ending military operations against Iran.
The futures contract expiring in May for Brent oil, the global benchmark, ticked up by 0.1% to $112.87 a barrel by 04:49 ET (08:49 GMT), while West Texas Intermediate crude futures had dipped by 0.4% to $102.49 a barrel.
Get more breaking news on oil and the Iran war by subscribing to InvestingPro
On Tuesday, crude prices initially jumped 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 Hormuz 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.
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 in Hormuz is likely to continue disrupting global supplies, given that roughly 20% of the world’s oil supply flows through the strait.
Oil set for over 50% rally in March Brent and WTI futures were set to add between 50% and 54% in March, one of their biggest monthly gains on record, as markets priced in risk premium and supply disruptions from the Iran conflict.
Iran has effectively blocked the Strait of Hormuz and attacked oil tankers and infrastructure in nearby Persian Gulf countries, driving 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.
