Oil prices experienced their largest gain since April after U.S. President Donald Trump announced the reinstatement of a blockade on Iranian ships transiting the Strait of Hormuz. Additionally, he proposed a 20% charge on all other cargo moving through the strategic waterway, triggering renewed anxieties about global energy supplies. West Texas Intermediate futures jumped 9.4% to settle near $78 per barrel, marking their highest level in almost a month, while Brent crude closed above $83 per barrel. Prices continued to climb in post-settlement trading after Trump threatened to strike Iran "very hard." This escalation followed a weekend of U.S. and Iranian strikes, including attacks on energy infrastructure, which dashed hopes for an easing of tensions and normalization of shipping through Hormuz.
The Joint Maritime Information Center confirmed that U.S. Central Command would begin enforcing the blockade of Iranian ports and coastal areas at 4 p.m. ET on Tuesday. Analysts warned that this move could increase the risk of further attacks on commercial shipping in the world's most vital oil transit chokepoint. The proposed 20% transit charge would amount to approximately $32 million for a fully loaded supertanker, significantly higher than previous Iranian fees. Increased shipping costs are expected to lead to higher crude prices. The International Maritime Organization reiterated its opposition to charging fees for passage through international straits.
Trump stated in a social media post that Hormuz "will remain OPEN, with or without Iran," positioning the United States as the waterway's "guardian" and suggesting a 20% reimbursement on all other cargo. Earlier, he indicated to Fox News that the U.S. might seek to take control of the chokepoint. Rebecca Babin, senior energy trader at CIBC Private Wealth Group, noted that reinstating the blockade is an "escalation ladder" that is forcing crude to reprice geopolitical risk. Saul Kavonic, senior energy analyst at MST Marquee, suggested that oil could reach $100 per barrel if the conflict expanded to target key facilities more broadly.
Meanwhile, Yemen's Houthis claimed responsibility for missile and drone attacks on a Saudi airport in response to earlier Saudi strikes on Sanaa. On Sunday, U.S. forces struck dozens of targets aimed at reducing Iran's ability to threaten shipping through Hormuz, while Iran launched attacks on U.S. allies in the Middle East. Kuwait also reported damage to an offshore drilling platform, marking the first direct strike on energy infrastructure in weeks.
Oil prices have rebounded to their highest in almost a month, partially offsetting a second-quarter drop of about 30%. Before the recent conflict, approximately one-fifth of the world's crude and liquefied natural gas traveled through the Strait of Hormuz. European natural gas prices also surged by as much as 3.3% to a three-month high. An interim peace agreement in June had previously led to a retreat in oil prices, but the fresh uncertainty surrounding Hormuz has reintroduced a geopolitical risk premium to crude markets.
