Oil Surges 12% as US Reinstates Iran Blockade
Crude prices have surged 12% since Friday to a one-month high after the US reinstated its blockade on Iranian oil exports, abruptly ending weeks of geopolitical calm.
Oil prices jumped 12% this week, with Brent crude hitting a one-month high on Tuesday as the United States reinstated its blockade on Iranian oil exports. The sharp rally, which extended an 8% surge on Monday, effectively erased the risk premium unwinding that followed a mid-June memorandum of understanding between Washington and Tehran.
In Asian trading on Tuesday, Brent crude gained 1.91% to reach $84.89 a barrel, approaching the $85 mark. The US benchmark, WTI, rose 2.02% to $79.72, testing a breakout above $80.
The market has abandoned its previous assumptions about a smooth recovery of traffic through the Strait of Hormuz. Weekend re-escalation and the subsequent blockade announcement have driven home the persistent fragility of Middle Eastern supply routes.
Adding to market confusion is a proposed 20% fee on shipping through the strategic waterway. US President Donald Trump stated the toll would cover costs for the US to act as the "Guardian of the Hormuz Strait" and provide security to the volatile region.
Analysts are highly skeptical of the proposal's logistics and intent. ING commodities strategists Warren Patterson and Ewa Manthey noted in a Tuesday brief that “there are few details on how this would work—or how serious Trump is about it.”
If implemented, the financial impact on the physical crude market would be massive. ING calculated that a 20% fee on a 2-million-barrel supertanker priced at $80 per barrel would equate to roughly $32 million, or an additional $16 per barrel. “This is significantly higher than the $1/bbl toll for which Iran has been pushing,” the strategists said.
For traders and corporate buyers, the sudden return of war risks fundamentally alters the supply outlook. Rather than pricing in a gradual normalization of Iranian flows, the market must now weigh a structurally higher cost of moving crude through the world's most critical oil chokepoint.
