An oil storage terminal on the coast of Fujairah, UAE (File photo: Karim Sahib)
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Oil futures retreated from four-year highs on Tuesday, as the ceasefire between the U.S. and Iran remains fragile. That’s after Washington kick-started operation Project Freedom to ease the disruption in the Strait of Hormuz.
The key maritime artery - through which a fifth of the world’s crude oil and liquefied natural gas transits - has been the subject of disruptions since the U.S.-Iran War began on February 28, following initial threats by Iran.
It was followed by a subsequent blockade of Iran’s shipping lane in April by the U.S. navy which remains in place. However, on Monday, President Donald Trump initiated the operation that saw U.S. navy destroyers both transit the Strait as well as facilitate the passage of two merchant vessels through it.
The Iranians claimed to have launched warning shots at two U.S. navy vessels, which was disputed by the U.S. The U.S. then claimed to have destroyed seven Iranian naval boats, while the United Arab Emirates reported missile and drone attacks from Iran. One of these caused damage to oil storage facilities in the port of Fujairah on Monday.
However, at 10:15am EDT on Tuesday, oil prices retreated from overnight highs last seen in 2022, as a fragile ceasefire between the U.S.-Iran stayed in place. Global proxy oil futures benchmark contract Brent traded at $111.26 per barrel down 2.58% or $2.94, while the U.S. benchmark was down 3.81% or $3.66 to $102.61 per barrel.
In response to the latest developments, U.S. secretary of war Pete Hegseth said Washington is "not looking for a fight" but Iran cannot be allowed to block the Strait of Hormuz.
Speaking at a media briefing, Hegseth added the clear and open aim of Project Freedom is to “protect innocent global commercial shipping from Iranian aggression”. He also said the operation was "temporary in duration" to facilitate maritime traffic that has been held back for weeks.
Secretary of war Pete Hegseth calls on reporters during a press briefing at the Pentagon on May 05, 2026 in Arlington, Virginia, U.S. (Photo: Somodevilla)
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The secretary insisted “the ceasefire is not over” but urged Iran to be “prudent” and not inflame the situation, something Tehran has in turn accused the U.S. of doing.
According to Hegseth, provocations by Iranian naval fast boats on Monday was low-level "harassment" and did not meet the threshold for a return to full-scale combat operations in the Middle East.
The U.S. estimates the number of commercial shipping vessels stuck in the region to be 1,550. Following the commencement of Project Freedom, it is still unclear whether shipping companies or marine insurers will feel confident enough to transit the Strait.
Before the war began, dozens of ships passed the Strait everyday. However, this was reduced to a trickle at the height of the conflict, until Monday.
Vessel tracking outfits like TankerTrackers and Marine Traffic are not reporting an appreciable uptick in maritime traffic through the Strait just yet. But this may also be down to ‘ship spoofing’ by the operators.
The practice involves fiddling a ship’s navigation or identification system to display false locations, including falsification of identification or positioning, and / or tricking navigation systems with fake signals.
While such practices were typically used to hide illegal activity or to evade oil sanctions, desperate times in the Strait have driven some to use it as a temporary protection measure.
Disclaimer: The above commentary is meant to stimulate discussion based on the author’s opinion and analysis offered in a personal capacity. It is not solicitation, recommendation or investment advice to trade oil stocks, futures, options or products. Oil markets can be highly volatile and opinions in the sector may change instantaneously and without notice.
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