Oil prices climbed on Tuesday following former U.S. President Donald Trump's announcement of plans to impose shipping fees in the Strait of Hormuz and reinstate a blockade of Iranian ports. West Texas Intermediate futures for August delivery increased by 2.27% to $79.91 per barrel, while international benchmark Brent crude futures for September delivery rose by 2.14% to $85.11, building on a 9.6% gain from the previous session. This move by Trump, who described the U.S. as the "guardian" of the vital oil transit route, has raised concerns about potential disruptions to global crude supplies.
Trump's proposal, announced via Truth Social, would levy a 20% fee on all cargo shipped through the Strait of Hormuz. U.S. Central Command confirmed the blockade of Iranian ports near the strait would take effect at 4 p.m. ET on Tuesday. This escalation follows a period where shipping traffic in the Strait of Hormuz, a conduit for roughly one-fifth of global oil supplies before earlier U.S. and Israeli strikes on Iran, had begun to recover after an interim agreement between Washington and Tehran. Citi analysts warned that this proposal significantly increases the risk of further military escalation, potentially leading to higher oil prices if Iran disengages from the memorandum of understanding until after the U.S. midterm elections.
The proposed 20% fee could translate to approximately $39 million for supertankers carrying about 2 million barrels of crude, based on current oil prices of around $80 per barrel. Shipping market participants, who had no prior warning of Trump's announcement, expressed surprise and skepticism about its administration and legal basis, with one captain likening it to "highway robbery." In contrast, Iranian Foreign Minister Abbas Araghchi acknowledged that those providing secure passage should be compensated but stated that "20 per cent is of course too much," adding, "We will be fair." Previously, Iran had reportedly charged up to $2 million per voyage on an ad hoc basis. The Strait of Hormuz is critical for both the U.S. and Iran, accounting for about a fifth of the world's oil and gas flows.
