TLDR
- Brent crude edged below $114 a barrel Tuesday after surging 5.8% Monday following fresh U.S.-Iran military exchanges
- U.S. and Iranian forces clashed in the Gulf, effectively breaking a four-week ceasefire
- Iran struck an oil terminal at Fujairah port in the UAE, and the UAE intercepted Iranian cruise missiles
- The U.S. launched “Project Freedom” to escort commercial vessels through the Strait of Hormuz
- 30-year U.S. Treasury yields topped 5% as traders bet the Fed may need to raise rates to fight inflation
Oil prices pulled back slightly on Tuesday after a sharp rally the day before, as markets watched a fragile ceasefire in the Middle East begin to fall apart.
Brent crude slipped 0.3% to $114.05 a barrel in Asian trade. West Texas Intermediate dropped 1.2% to $105.06. Both benchmarks had surged sharply on Monday — Brent by more than 4% and WTI by roughly 6%.
The selloff followed renewed military exchanges between U.S. and Iranian forces in the Gulf on Monday. Both sides attacked each other as they fought for control over the Strait of Hormuz, a narrow waterway through which a large share of the world’s oil passes.
The clashes broke a ceasefire between Washington and Tehran that had held for nearly four weeks.
Iran targeted infrastructure in the United Arab Emirates, including an oil terminal at Fujairah port, a key facility outside the Persian Gulf. The UAE said it intercepted Iranian cruise missiles and issued missile alerts to residents for the first time since the ceasefire began.
🚨IRAN EXTENDS ITS CLAIMED CONTROL ZONE OVER THE STRAIT OF HORMUZ
Iran has redrawn a NEW MAP of the Strait of Hormuz, and the comparison to the OLD MAP exposes the real story.
OLD MAP: Iran claimed 12 nautical miles from the Iranian coast, consistent with international maritime… pic.twitter.com/Zvwjv7LDus
— Coin Bureau (@coinbureau) May 4, 2026
Hundreds of ships were seen clustering near Dubai on Tuesday, moving away from the Strait of Hormuz as Iran tried to extend its control over the waterway.
The U.S. military said it had opened a passage through the strait. CBS reported two American destroyers crossed into the Persian Gulf.
U.S. Launches “Project Freedom”
President Trump announced a new operation called “Project Freedom,” aimed at escorting commercial vessels through the Strait of Hormuz and restoring shipping lanes.
The U.S. military said it had already begun escorting ships under the initiative. Analysts cautioned that any relief would be short-term.
“Any relief from stranded vessels making their way through the Strait will be temporary, with very few inbound vessels moving into the Persian Gulf,” ING analysts wrote.
Brent crude has risen more than 80% this year as the conflict has removed hundreds of millions of barrels from the market.
Inflation Fears Rise
Rising energy costs are stoking fears of broader inflation. In the U.S. Treasury market, 30-year yields climbed above 5% for the first time since July, as traders increased bets the Federal Reserve may need to raise rates.
Iranian Foreign Minister Abbas Araghchi said talks with Washington were “making progress” but warned against being “dragged back into quagmire.”
President Trump said the war could last another two to three weeks. Defense Secretary Pete Hegseth was set to brief reporters at the Pentagon on Tuesday.
“Escalation seems to be the path,” said Carl Larry, oil and gas analyst at Enverus. “Peace is dimming.”
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