Oil cuts losses after Trump says U.S. will respond to helicopter shooting by Iran

Oil prices on Tuesday pared some losses after President Donald Trump said the U.S. will respond to an Iranian attack that shot down an American helicopter. Crude benchmarks had slid earlier on easing tensions in the Middle East and hopes for a peace deal between Washington and Tehran.

At 12:54 ET (16:54 GMT), Brent crude futures expiring in August, the global oil benchmark, fell 2.8% to $91.60 a barrel, while U.S. West Texas Intermediate crude futures expiring in July declined 3.8% $87.81 a barrel. 

Brent prices briefly surged above $98 on Monday amid renewed military exchanges between Israel and Iran before retreating as signs of de-escalation emerged. But market sentiment improved after Trump said Israel and Iran were seeking an immediate ceasefire, and both countries later indicated they had halted strikes.

Trump later claimed on Monday evening that the U.S. was close to declaring a "total victory" in the Iran war within two weeks, adding that oil prices were likely to fall sharply.

Yet the ceasefire remains fragile and worries remain that the truce could unravel if either side resumes military operations. Iran has warned it could restart attacks if Israeli operations continue.

Meanwhile, the continued disruption of shipping through the Strait of Hormuz also kept a floor under prices. The waterway, a vital conduit for a fifth of the world’s oil, has been effecitvely closed for weeks by a double blockade maintained by Tehran and Washington.

Traders are also monitoring the impact of OPEC+ supply increases scheduled for the coming months. While the producer group has been gradually restoring output, the additional barrels are unlikely to fully offset disruptions linked to the Hormuz crisis.

Investors also await the upcoming U.S. consumer inflation data on Wednesday and producer prices figures on Thursday, which could help determine whether the recent spike in oil prices is feeding into broader price pressures. Fears have abounded that an energy-induced inflation burst could persuade central banks, including the Federal Reserve, to adopt a more hawkish monetary policy stance.