Crude Oil Plunges Amid U.S. Measures To Restart Traffic Across The Strait Of Hormuz

(RTTNews) - Reversing gains from yesterday's session, crude oil prices have plummeted on Tuesday after U.S. attempts to unblock Strait of Hormuz traffic boosted market sentiments, easing supply concerns while escalation worries vanished after U.S. Secretary of War Pete Hegseth confirmed that the U.S.-Iran ceasefire remains in place.

WTI Crude Oil for June month delivery was last seen trading down by $3.80 (or 3.57%) at $102.62 per barrel.

The U.S.-Iran war is now in its third month with an end to hostilities not visible despite several rounds of negotiations. However, the ceasefire announced by the U.S. on attacks against Iran continues to hold.

Since the start of the war on February 28, Iran has effectively shut the Strait of Hormuz blocking any traffic movement through the channel.

Reuters reported that according to an estimate by Goldman Sachs, global oil inventories are nearing their lowest level in eight years. The banking major predicts that the reserves stand at 101 days of global demand and could fall to 98 days by this month end.

According to the International Maritime Organization of the United Nations, around 20,000 sailors have been trapped in nearly 2,000 ships that have been stranded in the region for more than two months.

With an intention to contain oil prices by reopening the traffic blockade across the Strait of Hormuz, U.S. President Donald Trump initiated "Project Freedom," a plan which involves U.S. ships protecting and escorting the vessels stranded in the Strait of Hormuz region and moving them out safely.

As a humanitarian gesture to pull all ships belonging to countries not involved in the war out of harm's way, Trump announced this initiative stating that several countries asked for U.S. support.

Following the announcement of "Project Freedom," Iran threatened that ships violating the directives of Iran would face serious risks. Trump warned Iranian forces would be "blown off the face of earth" if it interferes in the operation and attacks any U.S. ships.

The U.S. had established an "enhanced security area" to the south of usual shipping routes in the strait, according to the Joint Maritime Information Center.

U.S. Central Command stated that over 100 land and sea-based aircrafts, guided-missile destroyers, and 15,000 service members are involved in the operation.

After the project kicked off yesterday, U.S. Central Command announced that two U.S.-flagged merchant vessels passed through the strait successfully under the U.S. protection and guidance with no untoward incident.

Earlier, the United Arab Emirates stated that four crucial missiles launched from Iran were engaged successfully. The Iranian missile-and-drone attacks set an oil refinery ablaze in the Fujairah Oil Industries Zone in the eastern emirate. Iran's neighbors condemned Iran over these attacks while European nations urged Iran to return to talks with the U.S.

Though concerns of a rupture in the ongoing ceasefire spiked, traders welcomed the U.S. initiative in restoring traffic across the strait with optimism. Consequently, crude oil prices plunged sharply today.

On May 3, Iran stated that it was reviewing the latest plans from the U.S. for a peace deal, but it has not provided any update so far.

The ongoing gulf crisis has led to a tremendous increase in oil and energy prices.

In the U.S., the average national price of a gallon of gasoline increased to $4.48 from $2.98 before the conflict began.

Experts feel that Trump's measures to free up the traffic blockade, if successful, could ease oil prices in the near-term until a permanent solution to end hostilities is reached by both nations.