Oil Prices Drop Amid Trump's Ultimatum to Iran Over Strait of Hormuz

Oil prices experienced a sharp decline on Monday as President Donald Trump issued an ultimatum to Iran, giving the country until Tuesday to open the Strait of Hormuz or face attacks on its power plants. U.S. West Texas Intermediate (WTI) crude for May delivery dropped around 2% to $109.30 per barrel, while international benchmark Brent crude fell over 1% to $107.80 per barrel. Trump's warning, delivered in a social media post, escalated tensions in the region and introduced uncertainty into global energy markets. The Strait of Hormuz, a critical maritime route connecting the Persian Gulf to world markets, has been effectively closed by Iranian attacks on oil tankers, disrupting about 20% of global oil supplies. The closure has led to the largest oil supply disruption in history, with crude, jet fuel, diesel, and gasoline prices surging since the conflict began. Trump previously stated in a national address that the conflict would likely last two to three weeks. Analysts warn that the prolonged disruption could result in a significant loss of oil and refined products. TD Securities estimates that nearly 1 billion barrels of oil and products could be lost by the end of April, with 600 million barrels of crude oil and 350 million barrels of refined products affected. Rapidan Energy projects a total net loss of 630 million barrels by June, factoring in redirected flows, emergency stockpile releases, and inventory drawdowns. Despite the ongoing crisis, OPEC+ members agreed to increase production by 206,000 barrels per day in May. However, the group acknowledged that repairing infrastructure damaged by Iranian attacks is costly and time-consuming, further complicating supply availability. Kuwait Petroleum Corporation reported significant damage to several of its facilities from drone attacks, underscoring the ongoing risks to energy infrastructure in the region.