Rubio Declares Operation Epic Fury Over as US Shifts to Defensive Hormuz Mission

In a major shift in US Middle East policy, Secretary of State Marco Rubio declared Tuesday that Operation Epic Fury—the combat operation launched against Iran in February 2026—has officially ended, with American forces now transitioning to a defensive posture aimed at reopening the Strait of Hormuz and rescuing thousands of stranded civilians trapped by Iran's blockade.

Speaking at a White House press briefing on May 5, Rubio emphasized that the US military effort has pivoted from offensive strikes to what he characterized as a "defensive operation" designed to escort commercial vessels through the critical waterway. "We're done with that stage," Rubio told reporters, referring to the months-long bombing campaign that targeted Iranian military infrastructure.

Project Freedom: Rescuing 23,000 Stranded Sailors

The new mission, which Rubio outlined as Project Freedom, aims to rescue approximately 23,000 civilian sailors from 87 different countries who have been stranded in the Persian Gulf since Iran effectively closed the strait in retaliation for US and Israeli military action. "These civilians have been left for dead by the Iranian regime," Rubio said, adding that the vessels carry essential goods including fuel, fertilizer, and humanitarian aid destined for dozens of nations.

The secretary emphasized that US forces would "only fire if fired upon," marking a sharp departure from the aggressive posture that characterized the first three months of the conflict. However, the situation remains volatile: Defense Secretary Pete Hegseth confirmed that Iran has attacked US forces more than 10 times since the ceasefire took effect, though he characterized these incidents as "below the threshold" for restarting major combat operations.

Oil Markets Respond with Sharp Decline

Financial markets reacted swiftly to Rubio's announcement, with crude oil prices tumbling approximately 4% in Tuesday's session. Brent crude closed at $109.87 per barrel, down from highs above $114 reached earlier in the day, while WTI crude fell to approximately $104.33 per barrel, according to data from Trading Economics and multiple market sources.

The decline reflects trader expectations that a de-escalation in direct US-Iran hostilities could ease supply constraints that have kept oil prices elevated since February. Brent had surged over 90% year-over-year at its peak, driven by fears that the conflict would permanently disrupt flows through the strait, which handles roughly 21 million barrels per day—approximately 21% of global petroleum liquids consumption.

Despite the drop, oil remains well above pre-conflict levels. US gasoline prices have increased by 50% since the start of the war, with Americans now paying an average of over $5 per gallon at the pump—a painful reminder that geopolitical risk premiums remain embedded in energy markets.

Casualties Mount as Strait Remains Contested

Rubio disclosed that at least 10 civilian sailors have been killed amid escalating violence in the Strait of Hormuz, where American forces have destroyed seven Iranian fast boats attempting to intercept commercial shipping. The secretary also confirmed that Iran has deployed sea mines throughout the waterway and implemented a controversial toll system for vessels attempting passage—a move the US and its Gulf allies have condemned as illegal under international maritime law.

President Donald Trump, speaking separately on Tuesday, suggested the ceasefire remains fragile. "Iran plays games but they do want to make a deal," Trump said, while declining to rule out resuming the bombing campaign if negotiations fail. "If there is no Iran deal, it will go quickly and methodically," he added, leaving markets uncertain about the durability of the current pause in hostilities.

Currency Markets: Dollar Retreats, Risk Appetite Returns

The announcement triggered a modest pullback in the US Dollar Index ($DXY), which had been trading near multi-month highs on safe-haven demand. The EUR/USD pair climbed from session lows around 1.0850 to test 1.0900 as traders unwound defensive positions, while the GBP/USD advanced above 1.3200.

Emerging market currencies, which had been hammered by risk-off flows throughout the conflict, showed signs of stabilization. The AUD/USD briefly rallied following the Reserve Bank of Australia's widely anticipated 25 basis point rate hike to 4.35%, though gains were capped as traders remained cautious about the sustainability of the ceasefire.

Gold prices, which have struggled to hold safe-haven bids due to dollar strength, edged higher in response to the news but remained well below recent peaks. XAU/USD traded around $4,580 per ounce, up modestly from session lows but still down sharply from the $4,700+ levels seen in late April.

UN Security Council Resolution in Focus

Rubio announced that the United States, in conjunction with Bahrain, Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar, has drafted a UN Security Council resolution demanding that Iran cease attacks, disclose the location of sea mines, and cooperate with demining efforts. The resolution also calls for the establishment of a humanitarian corridor through the strait.

The secretary characterized the resolution as "a very modest request" and warned that failure to pass it would call into question "the utility of the UN system." A similar Bahrain-led resolution was vetoed by China and Russia last month, raising doubts about whether the international community can rally behind even basic maritime security measures.

"If you're telling me that the international community and hundreds of countries cannot rally behind that, I don't know what the utility of the UN system is," Rubio said. He argued that even Russia and China have economic incentives to support the resolution, given the global supply chain disruptions caused by the closure of the strait.

What Traders Should Watch

Despite the shift to a defensive posture, significant uncertainty remains. Key factors to monitor include:

• Iran's response: Tehran has not formally acknowledged the US ceasefire declaration, and the Islamic Revolutionary Guard Corps issued a renewed warning Tuesday to vessels intending to transit the strait.
• Oil inventory data: Private surveys showed a larger-than-expected crude draw on Tuesday, suggesting demand destruction may be less severe than feared.
• UN Security Council vote: A successful resolution could provide diplomatic cover for Iran to ease restrictions, while a veto would signal continued paralysis.
• Federal Reserve policy: With oil prices retreating, some Fed officials may view the worst inflationary pressures as passing, though markets remain divided on the outlook for rate cuts.

Market Sentiment: Cautious Optimism

While Rubio's announcement represents a significant de-escalation, traders remain skeptical that the conflict has truly ended. The ceasefire has already been tested more than 10 times, according to Pentagon officials, and Iran continues to control access to the strait through a combination of military force and administrative obstacles.

For currency and commodity traders, the key question is whether oil can sustain its decline below $110 per barrel or whether supply fears will reassert themselves. A break below $100 on Brent would signal genuine confidence in a lasting peace, while a reversal back above $115 would suggest markets are pricing in renewed escalation.

As one forex strategist put it: "We've gone from war to cold war. That's progress, but it's not peace."