President Donald Trump's proposal to impose a 20% fee on cargo traversing the Strait of Hormuz has intensified concerns about global oil supply, especially amidst renewed US-Iran tensions. This levy, estimated by Lipow Oil Associates to add approximately $16 per barrel to crude shipped through the strait, is seen less for its direct cost and more for signaling heightened risks of shipping disruptions. Citi analysts warned that implementing the fee could trigger a broader military confrontation and suggested Iran might abandon a recent memorandum of understanding until after the U.S. mid-term elections, potentially leading to "higher for longer oil prices."
The proposed fee, which could amount to about $39 million per fully loaded supertanker carrying 2 million barrels of crude, has led to a sharp decline in vessel traffic. Kpler data showed only 14 ships, including four crude tankers, crossed the waterway on a recent Sunday, compared to 37 a week prior. This reduction in traffic raises fears that storage facilities could fill up, forcing producers to cut output and thus exacerbating supply shortages. The International Energy Agency's recent forecast of a return to oil market surplus by late 2026 is now in jeopardy, as this outlook depended on a gradual recovery of tanker traffic.
Oil prices have reacted strongly to these developments. U.S. West Texas Intermediate futures for August delivery rose 2.27% to $79.91 per barrel, while 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. Saudi Aramco recently cut prices for its primary Asian crude grade by $11 per barrel to a $1.50 discount against the Oman/Dubai benchmark, aiming to encourage Chinese refiners to increase purchases following earlier disruptions. However, experts like Henry Hoffman, co-portfolio manager at Catalyst Energy Infrastructure Fund, emphasize that the most significant concern is the risk of renewed physical supply losses.
