Global oil prices are on track to record their strongest monthly gain ever as US President Donald Trump indicated he is considering an exit from the war in Iran, even as hostilities continued to disrupt supplies in the Arabian Gulf.
Brent crude for May delivery traded near $119 a barrel, positioned for a record jump of more than 60% in March, following what has been described as the most severe energy supply shock in history. While the May contract expires on Tuesday, the more actively traded June contract rose slightly to trade near $108.
Trump told allies struggling to secure the jet fuel that typically flows through the Strait of Hormuz that they should “take it,” asserting in a social media post that the United States has sufficiently weakened Iran. The Wall Street Journal reported that Trump has informed aides of his readiness to end the military campaign even if the Strait remains closed, after his administration concluded that reopening the waterway would be too time-consuming.
The US President has reportedly decided that the United States should instead focus on crippling the Iranian navy and missile stockpiles before scaling back current combat operations.
Prices fluctuated in early Tuesday trading after Iran targeted a Kuwaiti oil tanker in a drone attack. The Al-Salmi, a fully loaded supertanker, was struck at its anchorage in the Port of Dubai, sustaining hull damage. Tehran has frequently targeted vessels across the Gulf since the conflict began, including attacks on two ships near Iraq.
“I think we are approaching a scenario of exiting the conflict faster than many people think,” said Christoph Ebel, chief executive and co-founder of Tiberius Group, in an interview with Bloomberg Television. “There is a possibility of a quick operation, quick entry, making some noise, blowing something up,” as the United States seeks a path out of the conflict.
The war, now in its fifth week, has resulted in the effective closure of the Strait of Hormuz, choking supplies of crude oil, natural gas, and products such as diesel to global markets. This has led to a sharp rise in energy prices and intensified inflation concerns. In the United States, petrol prices exceeded $4 a gallon for the first time since August 2022, posing a significant political risk for the Trump administration ahead of the midterm elections.
Trump’s public statements have alternated between claiming the end of the war is near and warning of his readiness to escalate military operations. On Monday, he stated that the United States would bomb power plants, oil facilities, and “perhaps” water desalination infrastructure if Iran failed to reopen the Strait of Hormuz.
U.S. West Texas Intermediate (WTI) has risen by more than 50% this month, its largest increase since May 2020. The market remains on edge regarding the buildup of U.S. forces in the region and the potential deployment of ground troops in Iran.
Military actions continued on Tuesday as Israeli forces launched a new wave of strikes on Iranian regime targets in Tehran, while Saudi Arabia intercepted and destroyed drones. The semi-official Mehr news agency reported that a joint U.S.-Israeli strike targeted Bahman port on the eastern side of Qeshm Island.
Over the weekend, Iran-backed Houthi rebels in Yemen attacked Israel with missiles. Tehran is reportedly pushing for a campaign against shipping in the Red Sea, which could threaten oil supplies from alternative routes outside the Strait of Hormuz.
Rebecca Babin, senior energy trader at CIBC Private Wealth Group, said moves toward a conflict exit were seeing “slight progress followed by successive setbacks.”
“With between 10 to 12m barrels per day effectively missing from the market, spare margins are vanishing and talk of lower oil prices is becoming less effective,” Babin said.
