Oil turned lower after the Wall Street Journal reported President Donald Trump told aides he's willing to end the military campaign in Iran even if the crucial Strait of Hormuz remains largely closed. West Texas Intermediate fell below $102 a barrel after jumping almost 4% earlier following another Iranian attack on an oil tanker in the Persian Gulf. Trump and his aides assessed that a mission to reopen the strait would push the conflict beyond his timeline of four to six weeks, according to the report.
Trump has regularly vacillated between saying an end to the war is near and warning he's prepared to ramp up military operations. On Monday, he said that the US will blow up power plants, oil facilities and "possibly" desalination infrastructure if Iran doesn't re-open Hormuz.
"Positioning had been complacent. Now $100 is a sort of purgatory. Too high to be stable, and too low to reflect the scale of this physical disruption,” Shaia Hosseinzadeh, chief investment officer at OnyxPoint Global Management. “The price signals are not adequately reflecting the physical realities on the ground.”
The war has effectively closed the crucial waterway to shipping, choking off supplies of crude, natural gas and products such as diesel from global markets, leading to surging energy prices and concerns about an inflation crisis. Despite Trump regularly saying a deal with Iran is imminent, the US has sent more troops to the region as the conflict extends into its fifth week.
A fully-laden Kuwaiti oil tanker was hit by Iran in Dubai Port causing a fire and damaging the hull, according to a statement from Kuwait Petroleum Corp. Iran has targeted ships across the Persian Gulf since the war began, and previously attacked two vessels near Iraq.
The attack on the Al-Salmi, a very-large crude carrier, took place just after midnight local time, and Kuwait Petroleum said the strike may have resulted in an oil spill in surrounding waters. Maritime firefighting teams are working to bring the fire under control, the Dubai Media Office said in a post on X.
"The tone remains one step forward, five steps back on any off-ramp,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “With 10 to 12 million barrels per day still effectively missing from the market, buffers are fading and talking crude lower is becoming less effective.”
There was further escalation in the war over the weekend after Iran-backed Houthis in Yemen entered the conflict and attacked Israel with missiles. Tehran is pushing the militants to prepare for a renewed campaign against Red Sea shipping, which could threaten oil supplies from alternative routes outside Hormuz, such as Saudi Arabian shipments from its Yanbu port.
Treasury Secretary Scott Bessent told Fox News the US is “going to retake control” of Hormuz, ensuring safe navigation “through US escorts or a multinational escort.” Iran's parliament, meanwhile, approved legislation to impose fees in the strait, according to the semi-official Fars news agency.
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