Global oil markets were whipsawed Tuesday after President Donald Trump extended a fragile cease-fire with Iran, only for reports to emerge that two more ships were struck in the Strait of Hormuz, highlighting the extreme volatility gripping the energy sector.
“Markets are reflecting mounting hopes of a peace deal,” Peter Cardillo of Spartan Capital said in a note. “We think it is likely to retest last week’s lows, as talks between the U.S. and Iran are expected to continue even if this round of negotiations does not produce a final deal.”
Brent crude, the global benchmark, initially fell on the cease-fire news to trade below $100 a barrel, a sharp reversal from its peak of nearly $120 a barrel in late March. However, the price pared losses to trade at $95.89, up 0.4%, following the attack reports. The conflicting signals left energy stocks, which had erased most of their wartime gains, in a precarious position, while the broader Nasdaq Composite index continued a 13-day winning streak, its longest since 1992.
The situation underscores the world’s dependence on the Strait of Hormuz, a critical chokepoint for nearly a fifth of global oil supplies. While the U.S. extended the cease-fire, citing a “seriously fractured” Iranian government, the continued attacks—real or perceived—threaten to derail diplomatic efforts and trigger a wider conflict that could severely curtail oil flows. The supply deficit is currently estimated to be closer to 5% than the 10% initially feared, according to Julius Baer, but markets remain pragmatic about the risks.
The war's impact has rippled across the economy. U.S. retail sales in March saw their fastest one-month rise in over three years, jumping 1.7% largely due to higher gasoline prices. The surge in fuel costs has also hit corporations, with United Airlines slashing its 2026 earnings outlook. Despite the recent drop from their peaks, crude prices remain roughly 25% above their pre-war levels.
While more than two dozen Iran-linked ships have reportedly evaded the U.S. blockade, the risk premium on oil remains elevated. The last time a similar level of disruption occurred in the region, it led to a sustained period of higher energy prices that weighed on global growth. Investors are now watching the upcoming talks in Pakistan, with any sign of progress or further escalation likely to trigger the next major move in the market.
This article is for informational purposes only and does not constitute investment advice.
