President Donald Trump's plan to impose a 20% fee on cargo passing through the Strait of Hormuz has sparked fears of renewed disruptions in oil supply, particularly if conflict escalates in the region. Analysts emphasize that while the direct cost of the fee may be less significant, the implications for shipping security are profound.
Andy Lipow, president of Lipow Oil Associates, noted that market optimism regarding oil supply has diminished, especially following the recent U.S.-Iran memorandum of understanding. He estimates that the proposed fee could add approximately $16 per barrel to oil prices, although the specifics of its implementation remain unclear.
Citi analysts warned that the risk of military escalation has increased, potentially leading to higher oil prices for an extended period. The immediate market reaction saw U.S. West Texas Intermediate futures rise by 2.27% to $79.91 per barrel, while Brent crude futures increased by 2.14% to $85.11.
Additionally, vessel traffic through the Strait has significantly decreased, with only 14 ships crossing recently, raising concerns that continued disruptions could force producers to cut output if storage capacities are reached.
This situation undermines previous expectations from the International Energy Agency regarding a stable oil market, particularly as Asian demand may rebound while Middle Eastern supply becomes less reliable. Saudi Arabia's recent price cuts for crude oil to Asian markets further illustrate the shifting dynamics as demand and supply reliability fluctuate