Oil prices eased more than 1% during Tuesday's Asian deals after a surge of over 4% in the previous session amid signs the United States Navy is loosening Iran's grip on the Strait of Hormuz, potentially opening up supply from the Middle East.
Trump on Monday launched a new operation, dubbed “Project Freedom”, aimed at reopening the strait to shipping.
Maersk later said the Alliance Fairfax, a U.S.-flagged vehicle carrier, exited the Gulf via the Strait, accompanied by the U.S. military, easing some supply disruption fears.
By 3:25 pm AEST (5:25 am GMT), Brent oil futures for July fell $1.16 or 1% to $113.28 per barrel after a rallying 5.8% higher on Monday.
U.S. West Texas Intermediate (WTI) crude fell $2.06, or 1.9%, to $104.36, after gaining 4.4% in the previous session.
The moves follow a series of escalating military incidents in the Strait of Hormuz, including Iranian drone and missile strikes on the United Arab Emirates (UAE) and a U.S. response targeting Iranian vessels.
ING Think commodities strategists Warren Patterson and Ewa Manthey noted: "This re-escalation comes at a time when the U.S. has started guiding commercial vessels through the Strait of Hormuz, under ‘Project Freedom’.
"Two U.S.-flagged commercial vessels have passed through the Strait of Hormuz under the plan, according to the U.S. Clearly, continuation of “Project Freedom” risks further escalation.
"Any relief from stranded vessels making their way through the Strait will be temporary, with very few inbound vessels moving into the Persian Gulf.
Markets may find some relief today following President Trump’s overnight comments suggesting the conflict could continue for another two to three weeks.
"However, markets are likely to view this with considerable scepticism, given the recent escalation and the repeated extensions of projected timelines for ending hostilities since the conflict began.”
The U.S. is pushing to open Hormuz to ease a massive disruption to global energy supplies since Iran mostly shut the strait after the U.S. and Israel started the war on 28 February 28.
On Monday, Chevron Chairman and CEO Mike Wirth told Reuters that physical shortages in oil supply would begin appearing around the world because of the Hormuz closure.
Additionally, because of the disruptions, global oil stocks are approaching their lowest level in eight years, Goldman Sachs said on Monday, warning that the speed of depletion was becoming a concern as supplies remained restricted.
