Oil recovered after its biggest one-day drop since April 2020, as the Strait of Hormuz remained largely blocked and Israeli attacks on Lebanon threatened to derail the fragile ceasefire in the Middle East.
West Texas Intermediate for May climbed above $102, while Brent edged up to about $99 a barrel after plunging more than 13% on Wednesday. Iran’s semi-official Fars news agency reported that passage of tankers through the strait was halted after Israeli strikes, though US Vice President JD Vance said there were “signs that the straits are starting to reopen.”
The boss of the UAE’s biggest oil company said that Hormuz was still shut and that Iran is restricting access to passage through the vital waterway. Iran’s deputy foreign minister told a UK news outlet that ships need the country’s consent to transit.
The near-closure of the waterway — through which about a fifth of the world’s oil and liquefied natural gas flowed before the US and Israel first struck Iran at the end of February — has caused the biggest-ever oil market supply disruption. Vance is slated to lead a US delegation to Islamabad for direct talks with the Iranian side on Saturday morning local time.
On Thursday, two fully-laden Chinese oil tankers in the Persian Gulf were approaching the strait, potentially putting them on track to become the first such vessels to cross since the ceasefire was announced. A successful passage is not guaranteed, and there’s been little change in traffic over the past day.
“While paper markets tend to price a full reopening, the physical reality is that any recovery in flows will be gradual — and hasn’t meaningfully begun,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
Iranian Parliament Speaker Mohammad-Bagher Ghalibaf said in a statement on X that three clauses of the ceasefire proposal have been violated.
Meanwhile, the Islamic Republic’s Ports and Maritime Organization announced two designated safe routes for vessels entering and exiting the strait, according to state-run Nour News. The passageways were established to avoid possible mines, according to the report.
White House Press Secretary Karoline Leavitt reiterated Wednesday that President Donald Trump expected the Strait of Hormuz to be “reopened immediately.”
Trump said in a social media post that US military personnel and weaponry would remain in place around Iran “until such time as the REAL AGREEMENT reached is fully complied with.” If Iran doesn’t comply, ‘the ‘Shootin’ Starts,’ bigger, and better, and stronger than anyone has ever seen before,” he said.
Even once Hormuz transit picks up, the return of energy supplies won’t be instant. Output has been reduced at oil and gas fields, while refineries have curtailed production or shut down. Some of those will take weeks — or possibly longer — to return to normal. Traders continued to seek North Sea crudes at elevated premiums in a sign that supply remains tight.
“The ceasefire announcement has not yet lifted oil flows through the Strait of Hormuz but a quick normalization is largely in the price, in our view,” Barclays analyst Amarpreet Singh said in a note. “A potential delay or further escalation poses upside risks to our $85/b Brent forecast for 2026.”
