President Donald Trump's new plan to levy a 20% fee on all cargo passing through the Strait of Hormuz and re-implement a blockade of Iranian ports has caused oil prices to jump significantly. This development has raised concerns among analysts about renewed physical supply losses, especially given that roughly one-fifth of global oil supplies typically pass through the Strait of Hormuz. The proposed fee, if applied to crude cargoes, is estimated by Lipow Oil Associates to add approximately $16 per barrel to oil shipped through the strait. This could translate to about $30 million to $39 million per full supertanker, which can hold around two million barrels of crude, based on current oil prices of about $80 per barrel.
Oil benchmarks have reacted strongly to this geopolitical escalation. U.S. West Texas Intermediate (WTI) futures for August delivery rose by 2.27% to $79.91 per barrel, and later by 2.83% to $80.35 per barrel. International benchmark Brent crude futures for September delivery climbed 2.14% to $85.11, extending gains after a 9.6% surge in the previous session, and later rose 3.89% to $86.54. This increase follows a period where the market had hoped for more stable supplies after a U.S.-Iran memorandum of understanding.
Analysts are warning of serious implications beyond just increased shipping costs. Citi noted that the implementation of the fee significantly raises the risk of broader military confrontation in the near term. The possibility also exists that the Iranian regime might abandon the recently signed memorandum of understanding before the U.S. midterm elections, which would likely lead to sustained higher oil prices. Henry Hoffman, co-portfolio manager at Catalyst Energy Infrastructure Fund, emphasized that decreased vessel traffic could force producers to reduce output if storage fills up due to an inability to export crude, potentially leading to much greater effective supply losses. Saudi Aramco recently cut prices by $11 per barrel to a $1.50 discount versus the Oman/Dubai benchmark, signaling shifts in global oil market dynamics.
The International Energy Agency (IEA) and other market watchers had previously expected global oil markets to be comfortably supplied and return to a surplus by late 2026, contingent on the recovery of tanker traffic through the Strait. However, these new developments threaten to undermine those expectations, making the outlook for oil surpluses uncertain. The reduced vessel traffic, with Kpler data showing only 14 ships crossing the waterway on Sunday compared to 37 a week prior, underscores the immediate impact of the heightened tensions. This situation could be particularly challenging if Asian demand rebounds just as Middle Eastern supplies become less reliable, potentially encouraging Chinese refiners to increase purchases after previous disruptions.
