Oil Prices Decline Amid U.S.-Iran Tensions and Supply Concerns

Oil prices declined on Tuesday, retreating from sharp gains in the previous session, as traders assessed the risk of immediate supply disruptions amid renewed tensions between the United States and Iran.

Futures for international benchmark Brent crude for July delivery slid 0.60% to $113.77 per barrel, while U.S. West Texas Intermediate futures lost 1.35% to $105.06 per barrel. This follows Monday's settlements, where Brent and WTI rose 6% and 4%, respectively.

The fragile ceasefire between the United States and Iran appeared close to unraveling after the United Arab Emirates was hit by Iranian drones and missiles, and Washington reported sinking Iranian vessels in the Strait of Hormuz. President Donald Trump warned that Iran would be "blown off the face of the earth" if it targeted U.S. ships safeguarding commercial traffic through the strait.

Global oil inventories are not yet at critically low levels, but the pace of drawdowns and uneven distribution across regions is raising concerns about localized shortages, according to a note from Goldman Sachs. The bank highlighted rapid depletion of refined product buffers, particularly in petrochemical feedstocks such as naphtha and LPG, as well as jet fuel.

Chevron CEO Mike Wirth expressed concern over growing fuel shortages in certain regions due to the strait's closure. "I think as people look at the realities of very tight supplies, it's not just a question of price," Wirth said at the Milken Institute Global Conference. "It's actually — can we get the fuel? I think over the course of the next several weeks, we'll see those effects begin to move throughout the system."

Total global oil stocks, including crude and refined products held both on land and at sea, are estimated at about 101 days of demand currently and could fall to 98 days by the end of May, Goldman Sachs noted. While this remains above emergency thresholds, the aggregate figures mask sharper shortages in specific regions and products, especially where export restrictions limit supply flows. The bank's analysts pointed to higher risks of product scarcity in South Africa, India, Thailand, and Taiwan.