Trump's Hormuz Transit Fee Proposal Sends Oil Prices Soaring

Oil prices have surged following U.S. President Donald Trump's announcement of a potential 20% toll on goods transiting the Strait of Hormuz and a renewed maritime blockade against Iran. Brent crude climbed over 3.5% to more than $87 a barrel on Tuesday, adding to a 9% jump from Monday. West Texas Intermediate (WTI) crude also saw a significant rise, costing over $80 a barrel.

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We think the peak of escalation is behind us, but there is a risk that oil prices will remain in the range of $85-90 per barrel.

This development has raised concerns about potential disruptions to oil supply. Analysts suggest that the proposed toll, if implemented, could significantly increase shipping costs, potentially adding around $16 per barrel for oil passing through the strait. While the U.S. has historically provided protection for shipping in the Persian Gulf, the proposed 20% fee is considered exceptionally high and its feasibility in ensuring safe passage is questioned.

Despite the sharp rise in oil prices, global stock markets have displayed unexpected resilience. European stock indices saw only moderate losses, and Asian markets, including South Korea's KOSPI, closed higher. Some semiconductor manufacturers recouped earlier losses, and oil giants like BP saw their stock prices increase. This market behavior suggests that investors may not yet anticipate a major escalation of the Middle East conflict, though analysts warn that oil prices could remain elevated in the $85-$90 range.

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It is not a precedent that the US offers protection services to ships in the Persian Gulf... However, imposing a 20 percent fee on ships is a rather exorbitant, even blackmailing level, especially since it is not clear whether the US is able to ensure safe transit in the first place.

The optimism surrounding a potential U.S.-Iran agreement that had previously supported supply expectations has now faded. Concerns are mounting that existing oil surpluses are threatened, particularly if the Strait of Hormuz were to be completely closed. The Trump administration has yet to clarify the specifics of how the transit fee would be calculated and applied.

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The market was counting on stronger supply after the signing of a memorandum of understanding between the US and Iran last month, but this optimism has already faded. These surpluses are certainly threatened, especially if the strait were to be completely closed.