Oil Prices Trim Earlier Gains After Trump Revises Hormuz Plan
Oil prices gave back part of their earlier rally on Tuesday after President Donald Trump changed his proposed policy for shipping through the Strait of Hormuz.
Trump said the strategic waterway would remain open to all vessels except those connected to Iran. He also indicated that a proposed 20% reimbursement fee for U.S. maritime protection would be replaced by trade agreements with Gulf countries.
Brent and WTI Remain Higher
At 11:33 ET, September Brent crude futures rose 1.5% to $84.57 per barrel.
August West Texas Intermediate futures also gained 1.5%, reaching $79.33 per barrel.
Earlier in the session, Brent had climbed as much as 5.1%, while WTI had advanced by approximately 4%. Prices later retreated from those highs following Trump’s updated comments.
Oil Had Surged Following New Measures Against Iran
Both major oil benchmarks jumped nearly 10% in the previous session, reaching their highest levels in around one month.
The rally followed the announcement of new U.S. measures targeting Iran’s maritime oil exports.
Trump had previously said the United States would restore a naval blockade against Iranian shipping after renewed military clashes between Washington and Tehran.
Trump Initially Proposed a 20% Hormuz Charge
The president also proposed collecting a 20% fee from cargo vessels using the Strait of Hormuz.
The payment was intended to reimburse the United States for providing security and protecting commercial shipping through the region.
However, Trump later suggested that the plan would be replaced with broader trade agreements involving Gulf nations. The policy adjustment reduced some of the immediate pressure on oil prices.
U.S. Blockade Targets Iran-Linked Vessels
The U.S. military said enforcement of the blockade would begin on Tuesday.
The operation would focus on vessels linked to Iran, while neutral commercial ships would still be allowed to use the waterway.
This distinction eased some concerns that the policy could restrict all shipping through the Strait of Hormuz.
Analysts Warned of Higher Shipping Costs
ING analysts said the renewed blockade represented a greater shock to energy markets than the earlier decision to suspend sanctions waivers on Iranian oil.
The firm estimated that a 20% transit fee could have added around $16 per barrel to the shipping cost of a very large crude carrier.
Such an increase could have raised transportation costs throughout the global oil market.
Military Attacks Increase Regional Risks
Tensions remained high following several reported attacks across the Gulf region.
Iran reportedly launched drone strikes against U.S. assets in Kuwait and targeted a vessel in the Strait of Hormuz with cruise missiles.
The United Arab Emirates also reported that two of its tankers had been attacked in Omani waters.
These incidents increased fears that the conflict could spread to regional energy infrastructure and commercial shipping.
Jefferies Expected the Fee to Be Reduced
Jefferies analysts said the size of the proposed charge demonstrated why control of the Strait of Hormuz had become so important to financial markets.
However, the firm questioned whether the 20% fee would remain in place.
Jefferies expected the administration to eventually reduce or revise the charge, particularly because of its unusually large size.
The proposal also represented a major departure from the traditional Western position supporting freedom of navigation through international waters.
Strait of Hormuz Remains Critical for Oil Markets
Investors remain concerned that further military escalation could disrupt energy exports from the Gulf.
Around one-fifth of global oil consumption passes through the Strait of Hormuz, making it one of the world’s most important shipping corridors.
Even a temporary interruption could restrict oil supplies, raise transportation costs, and push global energy prices higher.
Fragile U.S.-Iran Understanding Collapses
The renewed conflict followed several rounds of missile and drone attacks between U.S. and Iranian forces over the weekend.
The clashes effectively ended a fragile understanding reached the previous month to reduce tensions around the Strait of Hormuz.
Iran has warned that continued U.S. military operations could lead to further attacks against regional energy facilities.
Oil Rally Fuels Inflation Concerns
The sharp rise in oil prices also affected broader financial markets.
Higher energy costs increased concerns that inflation could accelerate again, potentially complicating the Federal Reserve’s interest-rate outlook.
Jefferies said markets were pricing in a greater than 40% probability of a Federal Reserve rate increase during the month.
However, the brokerage maintained its view that the central bank would not raise rates this year.
Oil Outlook Depends on Hormuz and U.S.-Iran Tensions
Oil prices may remain volatile as investors assess Trump’s revised shipping policy, the U.S. blockade, and the risk of further military action.
The replacement of the proposed Hormuz fee with trade agreements reduced some immediate concerns.
Nevertheless, any disruption to Gulf oil exports or commercial shipping could quickly send crude prices higher again.
