Crude oil recorded its biggest monthly gain in nearly four decades on Tuesday, closing out March with Brent futures up more than 60 percent as the United States-Israeli military campaign against Iran triggered what analysts are calling the most severe energy supply shock in modern history.
The global benchmark Brent contract for May delivery rose about 5 percent on Tuesday to close at $118.35 per barrel, while the more widely traded June contract fell 3.2 percent as traders responded to signals that the war may be nearing an end. West Texas Intermediate (WTI), the United States crude benchmark, gained approximately 51 percent in March for its best monthly performance since May 2020.
The divergence between the near-term and forward contracts captured the central tension gripping oil markets: an active conflict still closing off one of the world’s most critical shipping lanes, set against diplomatic signals that both sides may be ready to step back.
President Donald Trump told his aides he was willing to end United States military operations against Iran even if the Strait of Hormuz remained shut, according to The Wall Street Journal. Unconfirmed reports also indicated that Iran’s President Masoud Pezeshkian was open to ending the war. Iranian state media later confirmed that Pezeshkian said Tehran was ready to halt fighting, provided it received assurances against further attacks.
The ceasefire signals, however, did not halt hostilities on Tuesday. Iran struck a Kuwaiti oil tanker anchored outside Dubai. No injuries were reported and no oil spill occurred, according to a statement from Kuwait Petroleum Corporation. The attack indicates a further tightening of Iran’s grip on the Strait of Hormuz, targeting tankers just outside the waterway, said Ben Emons, chief investment officer at FedWatch Advisors, highlighting renewed risks of further disruption to energy flows. “The result is a more asymmetric game, with the U.S. leaning toward exit and Iran still incentivised to impose cost,” Emons said.
The Strait of Hormuz, through which roughly a quarter of the world’s seaborne oil normally passes, has been effectively closed to commercial shipping since the conflict began on February 28. Analysts at BCA Research estimate the war has removed 4.5 to 5 million barrels per day from global supply, roughly 5 percent of the world total.
Inside the White House, senior officials have privately acknowledged that they cannot both achieve their military objectives quickly and guarantee the strait’s reopening within the same timeline, according to sources familiar with the discussions. White House press secretary Karoline Leavitt confirmed that reopening the Strait of Hormuz is not among the core objectives Trump has set for the military campaign, with Defence Secretary Pete Hegseth describing it as “not just a U.S. problem set.” Trump is scheduled to address the nation on Wednesday night with what the White House described as “an important update on Iran.”
The average price of gasoline in the United States crossed $4 a gallon on Tuesday for the first time in almost four years, adding political urgency to an administration already under pressure from allied governments over the economic fallout of the conflict.
European nations have called for a negotiated resolution. British Prime Minister Keir Starmer said the United Kingdom would not be drawn into the wider war but stressed the need to reopen the Strait of Hormuz to stabilise global energy markets. Pakistan and China issued a joint five-point peace initiative calling for an end to hostilities, the security of shipping routes, and a return to United Nations-led negotiations.
For now, the June Brent contract’s retreat toward $103 per barrel suggests markets are beginning to price in some probability of de-escalation. But analysts caution that any breakdown in talks, or a new attack on energy infrastructure, could rapidly erase those gains and push prices toward the 2008 all-time high of $147 per barrel. The trajectory of oil in the days ahead will hinge on Wednesday’s presidential address, the state of back-channel diplomacy, and whether the Hormuz waterway shows any signs of reopening to commercial traffic.
