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US Oil Update: Crude Settles Lower as Market Weighs Conflicting Middle East Signals

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Crude oil futures settled lower in after-hours trading on Tuesday as markets weighed signs of a de-escalation between Iran and Israel against President Trump's comments on a response to the downing of an American military helicopter.

Front-month West Texas Intermediate crude futures dropped by 2.85% to $88.70 per barrel, while Brent futures were down 2.82% to $91.58/bbl.

Trump said on Tuesday that the US will "respond" as he alleged that Iran shot down an Apache helicopter that was patrolling over the Strait of Hormuz, stoking fears of a return to clashes with Iran.

The two pilots involved in the attack "are safe and uninjured," Trump said in a social media post on Truth Social post, adding, "Nevertheless, the United States must, of necessity, respond to this attack."

The remarks by the US President came hours after he said that a deal to end the Middle East conflict was days away and within reach after he had brokered a halt to hostilities between Israel and Iran, easing tensions that had threatened to derail broader peace efforts.

Iranian and Israeli officials said on Monday that the two sides had halted attacks on each other after an appeal from Trump that they immediately stop shooting, according to media reports.

Meanwhile, US Energy Secretary Chris Wright reportedly said that commercial vessel traffic and oil exports via the Strait of Hormuz are rising, even as the US and Iran struggle to reach a deal to end the war, which has been ongoing for over three months.

Soojin Kim, research analyst at MUFG, said that although the de-escalation improved market sentiment, the Strait of Hormuz remains effectively closed, continuing to disrupt global flows of crude, fuels, and natural gas.

Iranian Foreign Minister Abbas Araghchi on Tuesday reaffirmed Tehran's claim over the strategic waterway, warning that Iranian armed forces are on alert against any foreign presence near its territory.

Araghchi said the Strait is "not international waters" but is shared between Iran and Oman, adding that its maritime boundaries are "crystal clear" and geographically distant from the US.

On the demand front, China's overseas oil purchases fell to about 7.8 million barrels per day in May, the lowest in more than eight years.

Saxo Bank analysts said China's crude oil imports fell to an eight-year low last month at 33.1 million tons, or 7.8 million b/d, as refiners increasingly drew on accumulated inventories rather than sourcing additional barrels from abroad.

Global oil demand is now expected to fall by 1.1 million b/d in 2026, compared with 2025 levels of 104.0 million b/d, EIA said.

The downward revision in the EIA's May forecast follows a 200,000 b/d increase forecast in 2026, and an even steeper shift from February's estimate of a 1.2 million b/d gain.

The EIA said it projected demand would recover in 2027 as supply flows normalize, with global consumption forecast to rise by 2.5 million b/d to 105.3 million b/d.

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