Oil prices jumped dramatically on Monday, with Brent crude rising over 4% to $78.82 a barrel, and US crude oil closing 9.4% higher at $78.14 per barrel, marking the largest single-day jump for Brent since May 2020. This surge followed President Donald Trump's announcement that the US would resume its blockade on Iran and impose a 20% "reimbursement" toll on all cargo transiting the Strait of Hormuz. The US Central Command stated the blockade would begin on Tuesday against vessels traveling to or from Iranian ports.
This re-escalation came despite a memorandum of understanding signed on June 17, which had seen oil prices return to pre-conflict levels and briefly allowed maritime traffic to resume. However, renewed hostilities, including US strikes on Iranian targets and Iran's responses, led Trump to declare the agreement "over." The International Maritime Organization (IMO) rejected Trump's proposed toll, stating there is no legal basis for mandatory fees for passage through international waterways.
Traffic in the Strait of Hormuz had already sharply declined before Trump's announcement, with MarineTraffic by Kpler data showing a 52% week-over-week drop in transits. Analysts like Mukesh Sahdev of XAnalysts expect Brent crude to remain in the upper $70s per barrel during August and September, acknowledging potential occasional spikes and dips. Fabien Yip from IG also believes while the risk premium will keep prices supported, a return to the much higher wartime levels of nearly $120 a barrel is unlikely due to slow demand recovery and increased supply from OPEC+.
The volatility and uncertainty surrounding the Strait, a critical conduit for a fifth of the world's energy supplies, have prompted concerns across the market. GasBuddy analyst Patrick De Haan predicts the national average price of gasoline could reach $4 per gallon soon. The US Treasury Department warned that paying Iran for passage through the Strait would lead to sanctions violations, while marine insurance markets remained cautious, recognizing that sustained stability is needed before risk assessments change significantly. The latest developments reinforce a trend of reducing reliance on the Middle East for long-haul procurement of energy supplies.
