Oil prices flat as Trump’s Hormuz Strait plan fails to reassure markets

World crude oil prices were nearly unchanged on the morning of May 26 after US President Donald Trump declared he would guide stranded ships out of the Strait of Hormuz. International benchmark Brent crude remained almost flat in early Monday trading, as traders saw little hope that Trump’s plan could resolve the greatest energy disruption in history. Brent crude futures for July delivery stood at $108.25 a barrel at 02:30 GMT, up 0.08%.

Speaking on Sunday (May 25), President Trump said the US would "help liberate" ships stuck in the Gulf starting Monday, but provided few details on how the operation, named "Project Liberty," would work. Trump did not specify whether the plan involved US Navy escorting, a proposal previously rejected by administration officials citing lack of adequate preparation. Senior Iranian officials signaled they would not cooperate with Trump’s plan, adding further uncertainty to the fragile ceasefire between the parties that took effect on April 7.

Ebrahim Azizi, Chairman of the Iranian Parliament’s National Security Committee, warned on Sunday that any "US interference" in the strait would be considered a violation of the ceasefire agreement. On the same day, the British military reported receiving a report of an oil tanker being hit by "strange artillery" off the coast of the United Arab Emirates, hours after a cargo ship reported being attacked by multiple small boats off Iran. Crews of both vessels were unharmed, according to the United Kingdom Maritime Trade Operations (UKMTO).

June Goh, senior oil market analyst at Sparta in Singapore, said Trump’s plan appeared to focus more on rescuing stranded seafarers than restoring maritime traffic through the strait. "Observable global oil inventories are beginning to drop sharply, which will impact market sentiment more than political statements about reopening the strait. Normalizing flows through the Strait of Hormuz will require more than what Project Liberty offers, while the large gap in oil supply will take months to resolve," Goh told Al Jazeera.

Iranian threats to vessels in the Gulf have reduced maritime traffic through the strait to a fraction of peacetime levels, paralyzing a significant portion of the world’s oil and natural gas supply. Goldman Sachs estimates that the effective closure of the waterway, which normally carries one-fifth of the world’s oil supply, along with attacks on energy infrastructure, has cut global output by 14.5 million barrels per day. Brent crude has risen nearly 50% since the start of the conflict, with analysts warning prices could remain elevated for a long period after any peace deal between Washington and Tehran due to unresolved energy supply backlogs and the need to clear Iranian mines from the route.

According to ship-tracking data from maritime intelligence platform Windward, only 20 vessels crossed the strait last Wednesday, the most recent day for which data is available. Before the US and Israel launched their campaign against Iran in late February, the strait saw an average of 129 ship passages per day, according to the United Nations Conference on Trade and Development (UNCTAD).