Oil prices surged due to escalating tensions in the Strait of Hormuz, jeopardizing the truce between the US and Iran. The Middle East has been embroiled in conflict since February 28 when the US and Israel conducted joint strikes on key Iranian locations. In retaliation, Iran targeted sites across the region and closed the vital trade route of the Strait of Hormuz, a passage through which 20% of the world’s oil trade flows.
To tighten pressure on Iran and encourage peace talks, the US imposed a blockade on Iranian ports in the strait. President Trump pledged to assist non-participating countries’ vessels in navigating the route, but uncertainty lingered in the markets. Brent Crude, the global oil price benchmark, surged by 6% to reach $114.44 per barrel on Monday before slightly easing to $113.54 on Tuesday morning.
In response to Iranian assaults on commercial ships, the US military destroyed six of Iran’s small boats, while the UAE reported missile and drone attacks from Iran. Analysts suggested that the market anticipates more oil infrastructure damage and a prolonged closure of the strait, leading to a spike in oil prices. On May 4, the UAE intercepted missiles and drones launched from Iran, with one missile hitting a petroleum facility in Fujairah.
President Trump announced that the US military would guide commercial ships through the Strait of Hormuz, although maritime traffic in the region has not fully resumed. A ship was struck north of Dubai, causing an engine room fire, but all crew members were safely evacuated. The International Maritime Organization estimated that around 20,000 seafarers remain stranded on about 2,000 vessels in the Strait of Hormuz.
