NEW YORK — A sharp decline in oil prices eased on Tuesday morning following a stark warning from Defense Secretary Pete Hegseth about impending military action against Iran, as global markets grappled with escalating tensions in the Middle East.
U.S. crude oil futures, which had plunged more than 10% overnight on Monday, pared their losses to less than 4% by early trading Tuesday, according to market data from the New York Mercantile Exchange. International Brent crude followed a similar trajectory, remaining down about 5% after an initial steeper drop. The slowdown in the sell-off came hours after Hegseth announced that the day would mark America's "most intense day of strikes inside Iran," a statement that appeared to temper fears of prolonged disruption to global energy supplies.
The volatile trading reflected broader uncertainty over the ongoing conflict between the United States and Iran, which has disrupted shipping through the Strait of Hormuz — a critical chokepoint for more than 20% of the world's oil. Since the war began several weeks ago, the strait has seen intermittent closures and attacks on vessels, sending energy prices on a rollercoaster ride. Retail gasoline prices across the U.S. have surged 50 cents per gallon in that time, hitting consumers at the pump and fueling concerns about inflation and economic slowdown.
Wall Street opened mixed amid the energy sector's turbulence. The S&P 500 dipped 0.2% in early trading, while the Nasdaq Composite fell 0.1%. The Dow Jones Industrial Average shed 275 points, reversing pre-market futures that had pointed to gains. Energy stocks, however, showed resilience, with major producers like ExxonMobil and Chevron limiting losses as investors weighed the potential for higher prices if the conflict drags on.
Adding to the day's jitters, authorities in Abu Dhabi reported a fire at the Ruwais Industrial Complex, one of the United Arab Emirates' largest oil refining hubs. The facility, capable of processing over 900,000 barrels of oil per day, was struck by a drone, according to officials, leading to a temporary halt in operations. "We are dealing with the incident and assessing the damage," an Abu Dhabi government spokesperson said in a brief statement. The attack underscored the widening scope of the conflict, with Iranian-backed militias suspected of targeting Gulf energy infrastructure to retaliate against U.S.-led strikes.
In response to the mounting pressures, energy ministers from the Group of Seven (G7) industrialized nations convened an emergency virtual meeting Tuesday morning. The discussions focused on strategies to stabilize crude prices, including the possible release of strategic petroleum reserves. However, no immediate action was taken, disappointing some market watchers who had anticipated a coordinated intervention to flood the market and curb volatility.
France's Finance Minister Roland Lescure, who also handles energy policy, addressed reporters after the meeting. "Everyone's willing to stabilize the market, and everyone's willing to explore any ways to do so," Lescure said, emphasizing alignment between the United States and European allies. He noted that officials had directed the International Energy Agency (IEA) to examine options for tapping international oil stockpiles if needed. "The ... potential release of inventories is not the only way forward. And as you know, the best way to solve the problem is to reopen the Strait of Hormuz," Lescure added, highlighting the waterway's pivotal role in global energy flows.
The IEA, which coordinates emergency responses among its 31 member countries, echoed the cautious approach. Executive Director Fatih Birol announced a follow-up meeting later Tuesday "to assess the current security of supply and market conditions to inform a subsequent decision on whether to make emergency stocks of IEA countries available to the market." Birol's comments suggested that any reserve release would depend on a thorough evaluation of supply risks, rather than a knee-jerk reaction to price swings.
Behind the scenes, the Trump administration is considering a range of unconventional measures to tame prices, a U.S. official told NBC News on Monday. President Donald Trump is reviewing options such as restricting American oil exports to prioritize domestic needs, intervening directly in the futures market to influence trading, and easing certain provisions of the Jones Act. The 1920 law mandates that goods shipped between U.S. ports be carried on American-built and flagged vessels, which has long been criticized for inflating domestic shipping costs, including for fuel.
The White House has downplayed the price spike as temporary. Spokespeople have repeatedly described the surge as "short-term" and predicted a reversal once the war's objectives — including neutralizing Iran's nuclear capabilities and missile threats — are achieved. Trump himself reiterated this stance during a briefing on Monday, saying, "We're going to win big, and prices will come down fast." Yet, experts caution that such optimism may overlook the complexities of the global oil market.
Commodities analysts at JPMorgan Chase offered a sobering assessment in a note released Tuesday morning. "Policy measures may have limited impact on oil prices unless safe passage through the Strait of Hormuz is assured," the analysts wrote. They stressed that the strait, located between Iran and Oman, funnels roughly 21 million barrels of oil daily to markets in Asia, Europe, and beyond. Disruptions there have already forced rerouting of tankers around Africa, adding weeks to voyages and billions in extra costs.
The analysts went further, arguing that "the only truly durable and comprehensive solution would be to secure the Strait of Hormuz." Their view aligns with broader industry sentiment, where oil majors and traders are lobbying for naval escorts and enhanced defenses to protect shipping lanes. Without such measures, they warn, prices could rebound sharply if Iranian forces escalate attacks on tankers or refineries.
The conflict's roots trace back to heightened U.S.-Iran tensions following the 2023 collapse of nuclear talks and a series of proxy attacks in the region. The U.S. launched airstrikes on Iranian targets last month after blaming Tehran for drone assaults on American bases in Iraq and Syria. Iran has vowed retaliation, including threats to mine the Strait of Hormuz, which could cripple global trade. Economists estimate that a full closure could push oil above $150 per barrel, potentially tipping the world into recession.
Consumers are already feeling the pinch. In Appleton, Wisconsin, local gas stations reported average prices climbing to $4.25 per gallon, up from $3.75 a month ago. "It's hitting families hard, especially with school starting and holiday travel on the horizon," said Mark Thompson, owner of a Shell station on College Avenue. Similar stories echo across the Midwest, where trucking and farming industries reliant on diesel are bracing for higher operational costs.
Looking ahead, the coming days could prove pivotal. Hegseth's promised strikes are set to unfold, potentially targeting Iranian oil facilities or command centers. Markets will watch closely for any escalation that might further imperil supplies. Meanwhile, the IEA's afternoon meeting could signal whether reserves will be tapped, offering a short-term buffer. As one energy trader put it anonymously, "This is a high-stakes game of chicken — and the world's economy is riding on it." For now, the fragile calm in oil prices serves as a reminder of how quickly fortunes can shift in times of war.