Oil climbs as US Hormuz fee plan lifts supply concerns

Oil prices rose more than 2% on Tuesday after U.S. President Donald Trump said Washington planned to charge ships using the Strait of Hormuz and restore a blockade of Iranian ports near the waterway. The move sharpened market concern over a route that, before recent fighting, carried about one-fifth of the world’s oil supply.

U.S. West Texas Intermediate crude futures for August delivery gained 2.27% to $79.91 a barrel. Brent crude, the international benchmark, rose 2.14% to $85.11 a barrel for September delivery, adding to a 9.6% increase in the previous session.

Trump said Monday that the United States would impose fees on ships passing through the Strait of Hormuz, charging what he described as “20% on all cargo shipped.” He also called the United States the “guardian” of the waterway, according to his remarks cited by CNBC.

In a separate post on Truth Social, Trump said the U.S. would reimpose a blockade on Iranian ports close to the strait. U.S. Central Command later said the measure would begin at 4 p.m. ET on Tuesday.

Why Hormuz drives oil risk

The Strait of Hormuz links Gulf producers to international markets and is one of the most closely watched chokepoints in energy trade. A fee on cargo moving through the channel would add a direct cost to shipments, while a port blockade could restrict or complicate movements near Iranian waters.

For oil markets, the central issue is the risk that military action or retaliatory measures reduce the amount of crude able to move through the route. The CNBC report said shipping traffic fell after Iran began targeting vessels in the waterway in early March, following U.S. and Israeli strikes on Iran on Feb. 28. Traffic had started to recover after an interim agreement between Washington and Tehran.

Citi said in a report published early Tuesday that Trump’s proposed shipping fees “materially” increase the risk of further military escalation. The bank also said the likelihood had risen that Iran’s government could walk away from the memorandum of understanding until after the U.S. midterm elections.

Such a scenario would probably mean oil prices stay higher for longer, Citi wrote. That assessment reflects the bank’s view of the political risk around the agreement, rather than a confirmed change in the status of the arrangement.

The price reaction followed an already sharp move in crude, with Brent’s previous-session gain of 9.6% underscoring how sensitive the market has become to developments around Iran and the Hormuz route. Traders are weighing the prospect of higher transit costs, potential shipping disruptions and a broader confrontation involving the United States and Iran.

This story draws on original reporting from CNBC.