Oil prices dropped Tuesday after Defense Secretary Pete Hegseth said the US-Iran ceasefire still holds. Brent fell more than 2% to $111.45. WTI lost more than 3% to $102.65. That walk-back came one day after Iran fired missiles and drones at the UAE. Stocks moved up. Markets are betting the truce sticks.
May 5, 2026
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Hegseth told reporters the ceasefire "certainly holds." He added that the Pentagon is watching the situation very closely. The April 8 truce has now stretched four weeks.
He pointed to Project Freedom as proof. Two US-flagged commercial ships moved through the Strait of Hormuz on Monday under destroyer escort. The lane is open in his words.
The UAE air defense system intercepted 12 ballistic missiles, three cruise missiles, and four drones from Iran. Three Indian nationals in Fujairah were hurt.
A large fire broke out at a UAE oil refinery during the strike. It was the biggest hit on a Gulf state since the ceasefire began.
Brent peaked at $114.44 Monday, the highest level so far in 2026. WTI hit $106.42. Both pulled back hard once the ceasefire message landed.
Traders had priced in another full break. The retreat suggests the market still trusts Trump and Hegseth on the diplomatic track. A real war would put Brent well above $114.
Lockheed Martin just won a $4.7 billion award for missile production. The Pentagon is restocking after weeks of munitions burn. LMT shares traded between $511.40 and $520.50 Tuesday.
The new Pentagon budget puts $65.8 billion into shipbuilding. The Navy plans to buy 18 warships and 16 support ships under the proposal. That order book benefits the Gulf naval push.
Shipping firms still pulled back from Hormuz on Tuesday. There has been no real return to normal traffic yet. That keeps a floor under Brent and WTI even with the ceasefire.
Watch for any second night of UAE strikes. Watch for Trump's next public line. And watch tanker insurance rates, which spike before headlines do.
The ceasefire is bent, not broken. Oil reset lower because the worst case did not arrive. The trade is still defense names on restocking and refiners with no Middle East exposure. Stay sized for headlines either way.