Global oil prices slip amid Middle East tensions and US military action; prices continue higher stateside

Global oil prices slipped on Tuesday a day after the United States launched an operation aimed at reopening the Strait of Hormuz to shipping, although exchanges of fire between the U.S. and Iran limited the decline.

Brent crude futures eased $2.99, or 2.6%, to $111.45 a barrel at 1322 GMT after settling up 5.8% on Monday. U.S. West Texas Intermediate crude fell $3.70, or 3.5%, to $102.72, after gaining 4.4% in the previous session.

Maersk said the Alliance Fairfax, a U.S.-flagged vehicle carrier, exited the Gulf via the strait accompanied by the U.S. military.

“It shows that limited safe passage is possible under current conditions and helps chip away at some of the worst-case supply disruption fears,” said Tim Waterer, chief market analyst at KCM Trade, in an email.

“However, it’s still very much a one-off event rather than a full reopening,” he added.

Iran launched attacks on Monday

Iran launched attacks in the Gulf on Monday to counter U.S. attempts to take control of the Strait, which connects the Gulf to wider markets and typically carries oil and liquefied natural gas supply equal to about 20% of global demand every day.

Several merchant ships in the Gulf reported explosions or fires on Monday, and an oil port in the United Arab Emirates, which hosts a large U.S. military base, was set ablaze by Iranian missiles.

The U.S. military said on Monday it destroyed six Iranian small boats, as well as cruise missiles and drones.

“Prices continue to trade in a highly volatile range, driven largely by ongoing tensions in the Strait of Hormuz,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.

“While prices have eased slightly in recent sessions, this is not due to any real improvement in fundamentals, but rather a temporary relief after the U.S. launched ‘Project Freedom’” she added.

The relief, however, is not felt stateside in the prices being paid at the pump, according to AAA. Nationally, the average cost for a gallon of gas was $4.46, up 35 cents from last week, 36 cents more than last month, and $1.29 more than a year ago.

In Idaho, the average price for a gallon of gas was the same as the national average at $4.46 as of Monday, 13 cents higher than the same time a week ago, 20 cents more than a month ago, and $1.17 higher than this time last year.

According to AAA, Idaho has dropped out of the top 10 most expensive states for gas, ranking now at No. 16.

“Geopolitical turmoil is still at the heart of the matter, driving up the cost of crude oil and, in turn, gas prices,” said Matthew Conde, AAA Idaho public affairs director. “The continued uncertainty could make the market pretty jumpy in the short term.”

The least expensive fuel in Idaho on Tuesday, as reported by drivers on GasBuddy.com, was in Mountain Home, Idaho Falls, Ammon, Pocatello and Shelley at stations with a $4.19 price point.

Reporting by Alex Lawler, Anushree Mukherjee and Trixie Yap; Editing by Barbara Lewis. IBR staff contributed to this report.