The Hormuz Ceasefire Is Cracking — What It Means for Oil Prices

Brent crude fell $4.31 to $110.13 a barrel on Tuesday, surrendering most of Monday’s 5.8% spike after US forces sank six Iranian boats and a tanker was struck by projectiles near Fujairah. WTI dropped $3.80 to $102.62. Both governments insist the ceasefire holds. Markets don’t look entirely convinced — and neither should you. With 800 merchant vessels still trapped in the Gulf, Iranian mines uncleared, and a 14-point peace proposal that Washington calls “not acceptable,” the conditions for another price shock are firmly in place.

What Happened in the Strait

Monday, May 4 was the most violent day in the Strait of Hormuz since the April 8 ceasefire — and depending on who you ask, the story changes entirely. Two Arleigh Burke-class destroyers pushed through the strait under Project Freedom, a Pentagon operation deploying over 100 aircraft, Apache and Seahawk helicopters, and 15,000 personnel to restore freedom of navigation. Critically, this was not a convoy escort in the traditional sense — the US mapped a narrow transit lane and used aviation assets to provide cover, rather than steaming warships alongside merchant ships. Six Iranian fast boats moved to intercept vessels in the corridor and were sunk by US attack helicopters. Iran responded with cruise missiles and drones. US forces intercepted all of them. Two US-flagged merchant ships successfully transited the strait under military protection. No US ships were hit. No American casualties were reported.

Iran told a different story. Fars News Agency claimed two missiles struck a US warship near Bandar-e-Jask, forcing it to retreat. CENTCOM called the claim propaganda and denied it outright. The IRGC further alleged that American forces killed civilians aboard small cargo boats — a framing that directly contradicts the Pentagon’s account of armed fast attack craft targeting shipping. Two governments, one firefight, irreconcilable conclusions. That alone tells you something about how fragile the truth is in the Strait of Hormuz right now.

Both Sides Said the Ceasefire Was Fine

Here is the most striking part of Monday: after the most intense exchange of fire since April, both Washington and Tehran immediately walked it back.

Gen. Dan Caine, Chairman of the Joint Chiefs, said Iran’s attacks fell “below the threshold of restarting major combat operations at this point.” Defense Secretary Pete Hegseth told reporters the ceasefire was not over. Iranian officials framed the exchange as a limited reaction to American violations of ceasefire terms — not a resumption of hostilities. Two governments, one firefight, zero accountability.

Markets read the signals. Brent, which had touched $114.44 on Monday — the highest settlement of 2026 — gave back $4.31 on Tuesday. Gasoline futures dropped 26 cents to $3.48 a gallon. Gold climbed $32 to $4,565.30, reversing Monday’s safe-haven sell-off as the immediate panic subsided. Whether the calm reflects genuine de-escalation or collective self-delusion is a question markets will eventually be forced to answer.

Two Ships Through Is Not a Trade Route

Project Freedom put two US-flagged merchant vessels through the strait. Roughly 800 remain trapped.

According to Kpler, approximately 166 tankers carrying an estimated 170 million barrels of crude and refined products remain stuck inside the Gulf. ADNOC CEO Sultan Al Jaber put the figure even higher — 230 loaded oil tankers waiting inside the waterway. The International Maritime Organization counts roughly 20,000 mariners and 2,000 ships stranded in the Persian Gulf. Two ships through is not a victory. It is a demonstration.

The reasons the backlog won’t clear quickly are straightforward: the mines Iran planted in March remain uncleared — and according to some reports, Iran itself has lost track of where they are. Insurance premiums remain punitive, and Monday’s firefight gave underwriters no reason to revise their risk models downward. Analysts note that shipping companies will want to see several convoys transit successfully and undamaged before committing their vessels. Even under the best-case scenario, clearing the backlog could take three months once the strait fully reopens. The math does not flatter the optimists.

The Ceasefire Is Holding — But It Isn’t Settled

The price action tells you what the market actually believes: this is a managed conflict, not a resolved one.

Both sides are clearly trying to avoid full-scale war — but “below the threshold” is not the same as peace, and a framework that permits cruise missile exchanges and drone strikes on oil tankers is not a framework anyone should call stable. Iran’s own parliament warned before Monday that Project Freedom itself would constitute a ceasefire violation. The ceasefire signed on April 8 has now survived its most serious test. For now. The question is how many more tests it can absorb before one side miscalculates, and the whisper of de-escalation is drowned out by something louder.

Two things will drive the next meaningful price move. First, whether a second convoy runs this week and under what conditions — Monday proved the US can push ships through, but at the cost of a firefight neither side wants to repeat on a schedule. Second, and more importantly, the diplomatic track. Iran’s 14-point peace proposal remains on the table. Trump called it “not acceptable” but described discussions as “very positive.” If a deal advances, expect oil to surrender another $10 to $15. If the next convoy ends worse than Monday’s, expect Monday’s spike to look modest by comparison.

Brent at $110 is the market pricing in exactly that ambiguity — not war, not peace, but something deeply uncomfortable in between.