(July 15): Oil traded near its highest in a month as the US resumed its blockade on Iranian shipping and President Donald Trump U-turned on cargo payments in the Strait of Hormuz.
West Texas Intermediate futures was just below US$80 a barrel, after gaining 11% in the week’s first two sessions, while Brent closed near US$85 on Tuesday. The US resumed its blockade at 4pm Washington time, one hour after American forces launched fresh strikes on Iranian targets that’re meant to degrade the Islamic Republic’s abilities to hit commercial ships in the strait.
Trump, in a social media post on Tuesday, backed away from a plan he announced a day earlier to impose a 20% charge on cargo shipments through the waterway after US allies in the Gulf urged him to drop it. The expected revenue would be replaced by forthcoming direct investments in the US from Gulf states, he said, without specifying a dollar amount or naming countries.
The reversal was a welcome sign for shippers shaken by the collapse of the US-Iran ceasefire and the prospect of further disruptions in the world’s most important energy chokepoint, through which about a fifth of global crude and liquefied natural gas normally passes. It also illustrated the bind Trump is in, as hostilities with Iran flare and Tehran refuses to loosen its grip on the waterway, putting upward pressure on oil prices.
“There are a lot of unknowns,” said Scott Shelton, an energy specialist at TP ICAP Group plc. “Are we at war? Will the US be able to control the Strait of Hormuz and enable non-Iranian ships to get through? As of today, nothing is getting through.”
Oil has soared in recent days amid renewed fighting in the region, including attacks on crude-laden vessels, that have brought shipping to a near-standstill. Meanwhile, in a widening of the conflict, the Iran-backed Houthi group in Yemen fired ballistic missiles and drones on Saudi Arabia, the first major escalation between the sides since they agreed to a ceasefire in 2022.
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