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US Oil Update: Crude Drops as Trump Halts Iran Strike, Easing Supply Fears

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Crude oil futures retreated in midday trading on Tuesday after President Trump suspended a planned military strike on Iran to provide a window for peace talks, a decision that eased immediate supply disruption in the Middle East.

Front-month West Texas Intermediate crude futures slipped by 0.04% to $108.62 per barrel, while Brent futures were down 1.10% to $110.84/bbl.

"Oil prices fell after President Trump said he had postponed a planned US military strike on Iran following appeals from Saudi Arabia, Qatar, and the UAE, raising hopes for renewed negotiations," said Soojin Kim, research analyst at MUFG.

On Tuesday, Trump said he was "an hour away" from deciding whether to attack Iran before he was convinced to postpone the strike for a few days.

His remarks come a day after he claimed in a social media post on Monday that the US was delaying a previously unannounced strike planned for Tuesday because several Middle Eastern leaders asked him to "hold off" in light of ongoing discussions with Iran.

"One might think the oil market would become increasingly numb to these headlines. However, the scale of supply disruptions is significant and growing more concerning each day that oil flows remain halted," ING strategists said.

However, Iran's deputy foreign minister for legal and international affairs rejected any consideration for surrender, saying Tehran is united and ready to confront any military aggression.

"The United States says it has 'temporarily' stopped the attacks on Iran to give negotiations a chance, but at the same time speaks of readiness for a massive offensive at any moment," Kazem Gharibabadi said, adding that Trump's remarks mean calling "threat" a "peace opportunity."

The ongoing Middle East conflict has effectively closed the Strait of Hormuz, a critical waterway that handles about 20% of global oil and liquefied natural gas supplies, creating the world's largest oil supply disruption, according to the International Energy Agency.

The US Navy has redirected 88 Iran-linked commercial vessels and disabled four others since imposing the blockade on April 13, the US Central Command said in a social media post on Tuesday.

Iran unveiled a new body, the Persian Gulf Strait Affairs Authority, on Monday to oversee activities related to Hormuz. The agency said it would issue guidance to vessels transiting the waterway, including emails outlining passage rules and regulations.

Saxo Bank strategist said traffic via the Strait remains only a fraction of pre-war levels, despite the waterway accounting for about one-fifth of global oil supply.

On Tuesday, the US sanctioned over 50 entities, including oil and gas tankers as well as an Iranian foreign currency exchange, in its continued bid to get Tehran to agree to a deal and reopen the Hormuz.

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Oil & Energy

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