Oil prices surge as Trump announces shipping fees in Hormuz
What's the story
Oil prices surged by over 2% on Tuesday, following US President Donald Trump's announcement of plans to impose shipping fees in the Strait of Hormuz and reinstate a blockade on Iranian ports. The move has raised concerns over potential disruptions to global crude supplies. West Texas Intermediate (WTI) crude futures for August delivery rose by 2.27% to $79.91 per barrel while Brent crude futures for September delivery climbed by 2.14% to $85.11.
Strategic move
Trump threatens shipping fees in Hormuz, reinstates Iranian blockade
Trump announced on Monday that the US would impose fees on ships passing through the Strait of Hormuz, at a rate of "20% on all cargo shipped."
He also said Washington would reinstate its blockade of Iranian ports near the strait.
The US Central Command later confirmed that this blockade would come into effect at 4pm ET on Tuesday.
Risk assessment
Military escalation risk due to Trump's actions
Citi has warned that Trump's plan to impose shipping fees in the Strait of Hormuz significantly increases the risk of further military escalation.
The bank's report published early Tuesday also noted an increased likelihood that the Iranian regime could withdraw from the memorandum of understanding until after mid-term US elections, a scenario likely to result in prolonged high oil prices.
Supply concerns
Potential return of disruptions impacting oil supply routes
Before the US and Israel's strikes on Iran on February 28, about one-fifth of global oil supplies passed through the Strait of Hormuz.
However, shipping traffic declined after Iran started targeting vessels in early March.
The situation had begun to improve with an interim agreement between Washington and Tehran, but Trump's latest moves have now raised fresh fears over potential supply disruptions.
Attack details
UAE tankers attacked by Iranian missiles in Hormuz
The UAE Ministry of Defense has confirmed that two of its tankers were hit by Iranian cruise missiles in the southern lane of the Strait of Hormuz, within Omani territorial waters.
One Indian crew member was killed and eight others injured in the attack.
This incident further escalates the already heightened tensions between the US and Iran over oil supply routes.