Oil prices extended gains on Tuesday as U.S. President Donald Trump escalated rhetoric against Iran, threatening military action if Tehran does not reopen the critical Strait of Hormuz by a Tuesday evening deadline. The geopolitical tensions have intensified concerns over a prolonged disruption to global oil flows.
Market Reaction and Price Movements
Brent crude futures rose 57 cents, or 0.5%, to $110.34 a barrel, while U.S. West Texas Intermediate (WTI) crude futures increased by $1.26, or 1.1%, to $113.67. The gains reflect mounting anxiety in energy markets as the deadline approaches.
“Clock-watching is now playing almost as big a role in oil markets as the fundamentals themselves in the run-up to Trump’s ultimatum deadline,” said Tim Waterer, chief market analyst at KCM Trade. He noted that while potential ceasefire talks offer a counterweight, persistent supply worries are supporting prices.
Trump’s Ultimatum and Iranian Response
President Trump has threatened to rain “hell” on Tehran if it fails to comply with his demand to reopen the strait by 8 p.m. EDT Tuesday. “They could be taken out,” Trump warned, referring to potential strikes on Iranian civilian infrastructure.
Iran has rejected a U.S.-proposed temporary ceasefire, insisting on a permanent end to the conflict and resisting pressure to reopen the waterway. Iranian forces effectively shut the Strait of Hormuz following U.S. and Israeli attacks that began on February 28, blocking a chokepoint that typically carries about 20% of global oil flows.
Regional Escalation and Supply Disruptions
The conflict continues to escalate regionally. On Tuesday, explosions were reported in Damascus and surrounding areas from Israeli interceptions of Iranian missiles, according to Syrian state TV. Saudi Arabia’s defense ministry stated it intercepted and destroyed seven ballistic missiles launched toward its Eastern Region, with debris falling near energy facilities.
Further compounding supply concerns, Russia reported that Ukrainian drones attacked the Caspian Pipeline Consortium’s terminal on the Black Sea, damaging loading infrastructure and storage tanks. The terminal handles approximately 1.5% of global oil supply.
Broader Market Impacts
The closure has forced Asian and European refiners to scramble for replacement supplies, sending spot premiums for U.S. WTI crude to record highs. Saudi Arabia’s Aramco raised the official selling price of its Arab Light crude to Asia for May delivery to a record premium of $19.50 a barrel above the Oman/Dubai average.
Although OPEC+ agreed on Sunday to lift oil output quotas by 206,000 barrels per day in May, the increase is largely notional as key members cannot boost production due to export curbs from the strait closure.
International Diplomatic Efforts
The UN Security Council is expected to vote Tuesday on a resolution to protect commercial shipping in the Strait of Hormuz. However, diplomats indicate the measure has been significantly watered-down after veto-wielding China opposed authorizing the use of force.
As the situation remains volatile, global markets brace for potential further spikes in energy prices and broader economic ripple effects, including inflationary pressures and growth challenges.
