Unlock the White House Watch newsletter for free
Your guide to what Trump’s second term means for Washington, business and the world
Oil prices dropped on Tuesday as the US energy secretary signalled more ships were managing to transit the Strait of Hormuz.
Brent crude slipped 3 per cent to $91.22 a barrel in New York trading, while US marker West Texas Intermediate was down 3.6 per cent at $87.72.
Both benchmarks had fallen further earlier in the day but cut their losses after President Donald Trump said Iran had shot down an American helicopter over the Strait of Hormuz, and vowed to “respond” to the attack.
Tuesday’s slide in prices came as US energy secretary Chris Wright said ship traffic through the strait, through which about a fifth of the world’s oil flowed before the Iran war began in February, was increasing.
“I would say rising very meaningfully,” Wright said at an Atlantic Council event when asked how flows had changed over the past week or two. He added it would take “many months” for flows to fully recover.
Oil surged following the US and Israel’s initial strikes on Iran in late February. Brent rose as high as $126 a barrel in April as Tehran shut off flows through the strait and Washington imposed a naval blockade.
Prices have eased recently, however, as Trump indicated he was closing in on a deal with Iran to end the conflict and reopen the waterway. The president has come under sustained pressure from voters as the conflict drives up the price of fuel and groceries.
Data from maritime analysis groups shows the number of ships crossing the narrow waterway has edged up in recent days.
Since the outbreak of the conflict, more than 60 ships have transited the waterway without signalling their location, Lloyd’s List Intelligence data shows. The average number of “dark” transits has increased from two to six in the past week, according to Windward.
The uptick has in part been thanks to aerial assistance from the US military, according to one shipping executive with knowledge of the transits.
US Central Command, which is responsible for the Middle East, did not immediately respond to a request for details on the level of American support being provided.
A Centcom spokesperson said earlier this month: “Though US forces are not escorting, we continue to communicate and co-ordinate with commercial ships seeking to freely and safely transit the Strait of Hormuz.”
Market participants said the traditional tools used by the market to track flows might have missed some of the increases in recent weeks amid political shifts in the region.
“There is a lot of oil coming out of the Middle East,” said one industry analyst, adding that countries in the Gulf were striking deals with Iran to get oil out.
“What the market is missing at this point in time is how rapidly the geopolitical alliances are changing in the Middle East,” he said. “The traditional tools the oil traders and market have to track that are really struggling.”
Prior to the US-Israeli strikes on Iran on February 28, about 135 ships per day passed through the waterway but the conflict has brought traffic through the strait to a trickle.
The majority that have made it through have either benefited from bilateral arrangements between governments or have paid fees in cryptocurrency to Iran to avoid being hit.
Arsenio Dominguez, secretary-general of the International Maritime Organization, said on Tuesday that he was “increasingly concerned by reports that vessels continue to attempt to transit the Strait of Hormuz without any credible security guarantees, despite well-established risks and the fact that seafarers have already been killed, injured and others detained in recent incidents”.
The IMO said more than 40 ships had been attacked since the outbreak of hostilities and 11 seafarers had been killed.
Additional reporting by James Politi in Washington
