Benchmark crude prices fell by more than 1% on Tuesday as fears of immediate supply disruptions in the Middle East eased, following the safe passage of a US-flagged container ship through the Strait of Hormuz under American naval escort.
Benchmark crude prices fell by more than 1% on Tuesday. July futures for the Brent blend dropped by 1.26%, reaching $113 per barrel, while West Texas Intermediate (WTI) contracts lost 2.12%. This decline followed a sharp rise on Monday, when the two benchmarks had gained 5.8% and 3.2% respectively.
The easing of tensions in the Middle East came after reports from Danish television that a Maersk container vessel sailing under the US flag had successfully navigated the Strait of Hormuz, accompanied by American warships.
“The successful passage of the Maersk vessel under escort has helped alleviate some concerns over immediate supply disruptions,” said Tim Waterer, lead analyst at KCM Trade. He added that the limited but safe passage had helped dispel fears of a worst-case scenario, though he cautioned that this remained an isolated incident.
The ongoing conflict in the Persian Gulf, along with the mutually disruptive blockade of the Strait of Hormuz by Iran and the United States, has prompted a search for alternative routes.
The United Arab Emirates, for instance, enjoys several infrastructure advantages: a pipeline bypassing the Strait of Hormuz to the port of Fujairah has a capacity of 1.8m barrels per day. Moreover, a $150bn investment in the national oil company ADNOC is expected to raise production capacity to 4.8m barrels per day by 2026, with further growth to 5m barrels per day by 2027.
On May 3, the US president Donald Trump announced Operation “Freedom Project,” an initiative aimed at assisting commercial vessels trapped in the strait. The UAE, meanwhile, announced its withdrawal from the OPEC+ cartel effective from May 1.
