Oil prices climbed sharply on Tuesday as markets braced for a potential military escalation after U.S. President Donald Trump set an 8 p.m. Eastern Time deadline for Iran to reopen the Strait of Hormuz, with diplomacy appearing to fall short of what Washington would accept.
West Texas Intermediate (WTI) crude futures for May rose more than 2.9 percent to $115.63 per barrel, while Brent crude for June delivery gained approximately 1.5 percent to $111.43 per barrel, according to CNBC data. The gains reflect deepening market anxiety as the deadline approached with no breakthrough in sight.
Trump threatened on Monday that Iran would be “taken out in one night” if Tehran failed to comply, doubling down on earlier warnings that the United States would destroy the country’s power plants and bridges within four hours of the cutoff. He simultaneously acknowledged that Iran appeared to be engaging with the process, stating that he believed Tehran was negotiating in good faith.
Iran has rejected a U.S. ceasefire proposal outright, presenting instead a 10-point counter-plan through Pakistan, which serves as an intermediary. Tehran’s conditions include a permanent end to hostilities, a formal protocol for safe passage through the Strait of Hormuz, the lifting of sanctions, and reconstruction support. Trump described the proposal as significant but insufficient.
“There is no way to predict the outcome,” said Ed Yardeni, president of Yardeni Research. “We can’t rule out that Iran will cave in. Or, Trump may postpone the deadline again, explaining that negotiations are making progress. Or the war will escalate. The fog of war remains thick.”
Strait transit edges upward
Some movement has returned to the waterway. Eight tankers transited the Strait on Monday, up from fewer than two per day on average throughout March, according to S&P Global Market Intelligence. However, that remains a fraction of pre-war levels, when approximately 20 million barrels of crude oil and petroleum products passed through the corridor daily.
The Strait of Hormuz has been effectively closed since U.S. and Israeli strikes on Iran began on February 28, triggering what analysts describe as the largest oil supply disruption in history.
Supply pressures mount
The Organisation of the Petroleum Exporting Countries and its allies (OPEC+) agreed on Sunday to raise output quotas by 206,000 barrels per day in May, though the increase carries limited practical effect while exports from key Gulf producers remain blocked by the closure.
Saudi Arabia’s state energy company, Aramco, raised its official selling price for Arab Light crude to Asia for May delivery to a record premium of $19.50 a barrel above the Oman/Dubai average, reflecting the scramble by Asian and European refiners to secure alternative supplies.
Additional supply pressure emerged after Russia reported that Ukrainian drones struck the Caspian Pipeline Consortium’s terminal on the Black Sea, which handles roughly 1.5 percent of global oil supply, damaging loading infrastructure and storage tanks.
The United Nations Security Council was also expected to vote Tuesday on a resolution aimed at protecting commercial shipping in the Strait, though diplomats noted the measure had been significantly weakened after China opposed language authorizing the use of force.
Analysts at TD Securities have estimated that nearly one billion barrels of oil and petroleum products will have been lost from global markets by the end of April if the closure holds. Rystad Energy analyst Matthew Bernstein warned that energy markets were beginning to price in the longer-term consequences of a prolonged conflict.
