Oil prices saw a noticeable decline on Tuesday following statements from U.S. Energy Secretary Chris Wright, who indicated a "very meaningful" increase in ship traffic through the Strait of Hormuz.
The international benchmark, Brent crude futures, fell 2.97% to settle at $91.45 per barrel, while U.S. crude oil futures dropped 3.4% to close at $88.20 per barrel.
Wright, speaking in an interview with CNBC's Brian Sullivan at the Atlantic Council Global Energy Forum, confirmed that oil exports via Hormuz are on the rise and are projected to continue this upward trend. However, he did not disclose specific data supporting the reported increase in oil flows.
This downturn in oil prices occurred even as President Donald Trump alleged that Iran had shot down a U.S. Apache helicopter patrolling Hormuz. Trump, in a social media post, confirmed the pilots' safety but stressed the necessity of a U.S. response to the incident.
VIDEO: Amb. Dennis Ross on U.S.-Iran negotiations: The one card Iran has is the Strait of Hormuz (Duration: 5:11)
Hormuz Oil Flows Under Scrutiny
Analysts at JPMorgan, in a June 4 note, suggested that the actual volume of oil transiting Hormuz might be higher than publicly reported. They indicated that the U.S. Navy has been discreetly coordinating with certain vessels attempting to navigate out of the Persian Gulf.
The bank's estimates suggest that approximately 2 million barrels per day could be exiting the strait on tankers that have deactivated their transponders, making their movements less visible.
"Despite the ongoing naval blockade and the steep decline in commercial traffic, surprising volumes of crude and petroleum products still appear to be transiting the Strait," JPMorgan analysts commented.
Meanwhile, despite recent outbreaks of violence between Israel and Iran, President Trump attempted to assure markets on Monday that a deal with Tehran to reopen Hormuz was merely "two or three days away." This assertion comes amidst recurring claims from Trump about an imminent agreement that has yet to materialize.
The fragile ceasefire from April nearly collapsed this week after Iran retaliated against Israeli strikes in Lebanon by launching missiles at Israel. Israel responded with its own strikes on the Islamic Republic. Trump reportedly pressured Israeli Prime Minister Benjamin Netanyahu to prevent further escalation.
While the initial volley of strikes briefly pushed oil prices higher on Monday, the conflict appears to have subsided without further escalation for the time being, with both Iran and Israel reportedly ceasing fire.
Oil prices have seen an approximate 30% surge since the U.S. and Israel initiated attacks on Iran on February 28, to which Tehran responded by targeting tankers in the Strait of Hormuz and mining the waterway. This has led to a significant reduction in traffic through Hormuz, causing one of the most substantial oil supply disruptions in history.
Trump's strategy has involved imposing a naval blockade on Iranian ports and vessels in an effort to pressure the nation into a deal.
Oil industry experts and analysts largely attribute the relatively moderate crude prices, despite the scale of disruption, to the cushioning effect of global stockpiles. However, they caution that prices are likely to surge later in the year as these inventories deplete rapidly, coinciding with peak summer demand.
