Oil slips on de-escalation signal

Oil prices eased in Asian trading on Tuesday after giving up earlier gains, as traders weighed a report that U. S. President Donald Trump had told aides he was willing to end the war with Iran even if the Strait of Hormuz remained largely closed for now, softening some of the market’s immediate fear of a broader supply shock. Brent crude for May was quoted at $112.96 a barrel by 0438 GMT, while the more active June contract traded at $107.10, with the front-month May contract due to expire later in the day. U. S. West Texas Intermediate for May was down at $102.63 after earlier touching its highest level since 9 March.

The move captured the market’s central dilemma. Any suggestion of a diplomatic off-ramp has the power to trigger profit-taking after a month of extraordinary gains, yet the physical disruption that drove prices higher has not been resolved. Reuters reported that Trump was prepared to separate an end to military operations from the reopening of Hormuz, while also warning a day earlier that the United States could strike Iran’s energy infrastructure if Tehran did not restore passage through the waterway. That mixed messaging left traders trying to price both de-escalation and continuing disruption at the same time.

Hormuz remains the core of the story. The strait normally carries about a fifth of global crude and liquefied natural gas flows, making it one of the world’s most sensitive energy chokepoints. Reuters said Brent had climbed 59% in March, marking its biggest monthly rise on record, while WTI was up 58%, its strongest monthly gain since May 2020. Barclays estimated last week that a prolonged closure could remove 13 million to 14 million barrels a day from global supply, a severe hit in a market where the International Energy Agency sees demand running at roughly 104 million to 105 million barrels a day this year.

That helps explain why even a drop in Tuesday’s session did little to calm broader anxiety. Analysts quoted by Reuters said lower prices looked more like a reaction to headlines than a sign of easing fundamentals. Physical flows would need to be restored, not merely promised, before the market could convincingly reprice lower. Barclays said its base case still assumes traffic through the strait could normalise by early April, but it also warned that if disruption lasts through the end of April, Brent could reprice towards $100 a barrel, and a longer shock stretching into May could push it to $110.

The conflict has also widened the map of energy risk beyond Hormuz itself. Kuwait Petroleum Corp said its fully loaded tanker Al Salmi, capable of carrying up to 2 million barrels, was struck in an alleged Iranian attack at a Dubai port, underlining the vulnerability of shipping and port infrastructure. At the same time, Houthi missile activity has stirred concerns around the Bab el-Mandeb passage linking the Red Sea and the Gulf of Aden, another crucial corridor for tankers moving between Asia and Europe via the Suez Canal.

Producers and shippers have been scrambling to adapt. Reuters, citing Kpler data, said volumes rerouted from the Gulf to Saudi Arabia’s Red Sea port of Yanbu reached 4.658 million barrels a day last week, sharply higher than the 770,000 barrels a day average seen in January and February. That diversion has provided some relief, but it is not a full substitute for Hormuz. Barclays noted that exports from Yanbu and Fujairah can mitigate part of the shock, though not eliminate it if the closure persists.

Financial markets across Asia reflected the strain from higher-for-longer energy costs. Reuters said MSCI’s broadest Asia-Pacific share index outside Japan was heading for a monthly fall of more than 13%, Japan’s Nikkei was set for a drop of nearly 13%, and South Korea’s Kospi for a fall of more than 18%. Currency markets told a similar story, with the dollar strengthening as a haven while the rupee, rupiah and peso were pushed to record lows against it during March. Investors have also scaled back expectations of interest-rate cuts in the United States as oil-driven inflation pressure builds.