Oil slips but stays elevated as US moves to unblock Hormuz traffic

Oil prices traded mixed but held firm above the $100 mark on Monday after Donald Trump signalled that the United States would act to free ships stranded in the Strait of Hormuz, easing immediate supply concerns while leaving the broader geopolitical risk premium intact.

US West Texas Intermediate (WTI) futures for June edged down 0.10 per cent to $101.84 a barrel. In contrast, Brent crude futures for July rose marginally to $108.23 a barrel, up 0.06 per cent in early trade, indicating resilience at elevated levels.

In a post on Truth Social, Trump said the US would “guide ships safely out” of restricted waterways, aiming to restore normal shipping activity across the Gulf.

"For the good of ​Iran, the Middle East, and the United States, we have told these Countries that ​we will guide their Ships safely out of these restricted Waterways, so that they can freely and ably get on with their business," Trump wrote in the post.

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The Strait of Hormuz remains central to global oil flows, handling nearly a fifth of worldwide crude shipments. Disruptions in the passage have effectively tightened supply, even as headline production levels remain unchanged.

However, the structural drivers of elevated prices remain firmly in place. Diplomatic negotiations between the US and Iran have yet to produce a breakthrough, with both sides holding their ground on key demands. The US continues to prioritise a broader nuclear framework, while Tehran has pushed for sequencing — seeking relief from shipping restrictions before addressing nuclear concerns.

On the supply front, OPEC+ has agreed to raise output targets by 188,000 barrels per day in June for seven member countries, marking the third consecutive monthly increase. Yet, much of this additional supply is unlikely to reach the market in the near term, as logistical constraints tied to Hormuz continue to limit actual exports.

This divergence between policy signalling and physical supply has kept crude prices elevated despite nominal increases in production quotas. The exit of the UAE from OPEC earlier this month has also reshaped internal quota dynamics without materially altering supply expectations.

From a macro-financial standpoint, oil sustaining above $100 a barrel signals continued inflationary pressure globally. For India, a major crude importer, elevated prices could widen the current account deficit and complicate the Reserve Bank of India’s policy trajectory amid lingering inflation risks.

With inputs from agencies.