Oil prices slide 3% as fragile US-Iran ceasefire holds, US escorts ship through Strait of Hormuz

Oil prices fell about 3% on Tuesday, as at least one vessel passed through the Strait ‌of Hormuz and the United States said the ceasefire with Iran remained in place despite exchanges of fire.

Brent futures fell $3.83, or 3.4%, to $110.61 a barrel, while U.S. West Texas Intermediate crude fell $4.23, or 4%, to $102.19.

The United Arab Emirates said it was under attack from Iranian missiles and drones on Tuesday, even as Washington said the shaky ceasefire was intact.

“While tensions remain unresolved, the market is reacting to incremental normalization in shipping conditions, pulling back some of the elevated risk premium built into prices,” analysts at energy consulting firm Gelber & Associates said.

U.S. Defense Secretary Pete Hegseth said the U.S. had secured a path through the critical waterway and that hundreds of ships were lining up to pass through.

Before the U.S. and Israel attacked Iran on February 28, about 20% of global oil supplies passed through the strait daily.

Maersk said the Alliance Fairfax, a U.S.-flagged vehicle carrier, exited the Gulf via the strait, accompanied by the U.S. military.

“It shows that limited safe passage is possible under current conditions and helps chip away at some of the worst-case supply disruption fears,” said Tim Waterer, chief market analyst at KCM Trade, in an email.

“However, it’s still very much a one-off event rather than a full ‌reopening,” he added.

U.S. President DonalD Trump dismissed Iran’s military capability and said Tehran “should wave the white flag of surrender,” noting Iran’s military has been reduced to firing “peashooters” and that Tehran privately wants to make a deal.

The U.S. military said it destroyed six Iranian small boats, as well as cruise missiles and drones, after Trump sent the navy to escort stranded tankers through the strait in a campaign he called “Project Freedom.”

South Korea is reviewing whether to join Trump’s plan to help ships transit through the strait, an official said on Tuesday, following an explosion and fire on a Korean-operated ship in the waterway.