Oil prices reversed sharply higher on Monday after Iran rejected Washington’s “Project Freedom” initiative and fresh attacks struck energy infrastructure in the United Arab Emirates (UAE), deepening the worst oil supply disruption in modern history.
West Texas Intermediate (WTI), the US benchmark crude, surged as much as 3.5% to around $105 a barrel, while Brent crude, the international standard, jumped roughly 5% to approximately $114 a barrel. Both benchmarks had initially dipped overnight after US President Donald Trump announced the operation on Sunday, before reversing course as the situation on the water deteriorated.
Trump’s plan, which he described as a humanitarian effort to free stranded crews running low on food and supplies, involves guided-missile destroyers, more than 100 aircraft and 15,000 service members under US Central Command (CENTCOM). CENTCOM confirmed it had successfully guided two US-flagged merchant vessels through the strait, but analysts and markets quickly concluded the operation falls well short of a full reopening.
Iran declared the initiative a ceasefire violation and warned it would attack any US warship approaching the strait. Shortly after, Iranian drones struck the Fujairah Oil Industry Zone in the UAE, damaging a key pipeline used to bypass the Strait of Hormuz entirely. Oil prices climbed further on the news.
Market Skepticism Runs Deep
Eurasia Group warned that, unless there is buy-in from Iran or a major naval deployment in the region, Project Freedom will fail, stating the plan “will not substantially raise shipping volume through the strait in the near term.”
Bjørn Højgaard, chief executive of ship manager Anglo-Eastern, put it plainly: “It takes both sides to unblock, not just one.”
The market context underscores how severe the disruption has become. The Strait of Hormuz normally carries about 25% of the world’s seaborne oil trade and 20% of global liquefied natural gas (LNG), and has been largely closed since late February when US and Israeli strikes on Iran triggered retaliatory Iranian action.
Stephen Innes of SPI Asset Management described the oil market as “the fulcrum, with hundreds of tankers, bulk carriers, and cargo ships still stranded across the Gulf, idling as storage constraints force producers to shut production simply because there is nowhere left to store it.”
US gasoline futures surged around 4% on Monday, with retail pump prices hitting a crisis high of $4.46 per gallon, the highest level in nearly four years.
Stocks and Broader Markets
Despite the renewed oil pressure, equity markets retained much of last week’s momentum. The S&P 500 climbed 0.3% on Friday to another all-time high, closing out a fifth straight winning week, with the Nasdaq composite adding 0.9% to a record close of 25,114.44.
More than a quarter of S&P 500 companies have reported first-quarter earnings, with 84% topping analysts’ estimates, according to FactSet, and the index is on track to deliver roughly 15% profit growth from a year earlier. Apple led Friday’s gains after delivering stronger-than-expected profit, with its shares rising 3.3%.
In Asian trading overnight, South Korea’s Kospi gained 3.8% and Taiwan’s Taiex surged 4.2% on strong technology buying. Hong Kong’s Hang Seng rose 1.4%, while markets in mainland China and Japan were closed for Golden Week holidays.
Chevron chief executive Mike Wirth warned that fuel shortages are becoming a growing concern in some regions, saying it will likely take months for oil exports through the strait to normalise even after a resolution, given the time needed to check for mines and redeploy the hundreds of ships currently stuck in the Gulf.
Brent crude was trading above $70 a barrel before the Iran war began. The scale and durability of any price retreat now depends almost entirely on whether Project Freedom evolves into a genuine diplomatic breakthrough or stalls at the water’s edge.
