-- Crude futures declined on Tuesday despite a violent collapse of the ceasefire as the US military began escorting commercial ships through the Strait of Hormuz, while a retaliatory Iranian strike on a UAE oil terminal reignited fears of supply disruptions.
Front-month West Texas Intermediate crude futures dipped 3.5% to $102.67 per barrel, while Brent futures fell 2.6% to $111.39/bbl.
Despite the successful transit of two merchant ships, renewed hostilities between Washington and Tehran, including a major fire at the Fujairah terminal, limited market relief amid record-breaking global supply losses.
The hostilities broke out as the US initiated a mission to extract commercial ships currently trapped within the Persian Gulf.
"Clearly, continuation of 'Project Freedom' risks further escalation," ING analysts said.
Analysts noted that the oil market remains on high alert following the breaking news of an attack on a US Navy vessel.
The regional fallout intensified as the UAE reported its first defensive interceptions of Iranian missiles and drones since the April 8 ceasefire began.
However, one Iranian drone successfully struck an oil terminal at the Port of Fujairah, sparking a major fire at the facility.
Record-breaking supply losses of 10 million barrels per day have already depleted global inventories, and experts warn that if the Strait remains obstructed, this energy crisis could extend through late 2026 and into 2027.
"Markets may find some relief today following President Trump's overnight comments suggesting the conflict could continue for another two to three weeks," ING added, noting that markets are likely to view this with "considerable" skepticism.