Oil Retreats as Hormuz Attacks Push U.S.-Iran Ceasefire to Breaking Point

CNBC reported Tuesday that oil prices reversed course as traders weighed the risk of supply disruptions near the Strait of Hormuz, where a fragile ceasefire between Washington and Tehran appeared on the verge of collapse.

Prices Give Back Monday’s Surge

International benchmark Brent crude slipped 1.3% to around $112.85 per barrel in early Tuesday trading. U.S. West Texas Intermediate dropped a sharper 2.5% to roughly $103.78. Both contracts had surged roughly 4-6% the previous session, making Tuesday’s retreat a partial but significant pullback.

The reversal followed an escalation in the Persian Gulf over the weekend. Iranian drones and missiles struck the United Arab Emirates, while American forces reportedly sank Iranian vessels operating in the Strait of Hormuz. The waterway handles a substantial share of global seaborne oil traffic.

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Trump Warns Iran, Tehran Pushes Back

President Donald Trump threatened on Fox News that Iran would face total destruction if it continued targeting vessels under U.S. protection in the strait. Iranian Foreign Minister Abbas Araghchi pushed back publicly, writing on social media that the recent clashes demonstrate there is no military path out of a political dispute. He urged Washington to resist being drawn deeper into conflict by outside actors and cautioned the UAE as well.

Strategists at Dutch bank ING described the latest exchange of fire as the first visible fracture in the ceasefire framework. Analysts Warren Patterson and Ewa Manthey noted in a research note that Trump’s suggestion the conflict could drag on another two to three weeks offered markets limited comfort. They argued traders would greet that timeline with scepticism given how repeatedly earlier projections had been extended.

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Background: Supply Buffers Running Thin

The Strait of Hormuz has long been the single greatest chokepoint in global energy logistics. Any sustained closure forces tankers onto longer, costlier routes and squeezes product availability fast.

Goldman Sachs, in a note circulated Monday, said global oil inventories are not yet at crisis levels but refined-product buffers are depleting quickly. Naphtha, liquefied petroleum gas, and jet fuel stocks are especially tight. The bank estimated total crude and product stocks at roughly 101 days of demand and projected that figure could fall to 98 days by the end of May. Localized shortages look most acute in South Africa, India, Thailand, and Taiwan, Goldman analysts wrote.

Executives Sound the Alarm

Chevron CEO Mike Wirth told CNBC’s David Faber at the Milken Institute Global Conference on Monday that the supply picture was shifting beyond a pricing question. Wirth said some regions may soon face an availability problem rather than simply a cost problem, and predicted those pressures would become clearer over the coming weeks.

Iraq, an OPEC member, is reportedly offering buyers steep discounts on May-loading crude, though vessels must be prepared to transit the Strait of Hormuz to collect the barrels.

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