Oil hits $86 as traders doubt Trump's Strait of Hormuz toll
Brent crude surged 12% after the US announced a 20% transit fee and Iran attacked tankers, but markets are betting that Gulf pipeline workarounds will neutralize the long-term supply shock.
Brent crude surged roughly 12% to $86 a barrel after the US announced a 20% toll on all cargo transiting the Strait of Hormuz and Iran attacked commercial tankers. Despite the severity of the escalation, investors are refusing to fully price in a sustained supply shock. Traders are "showing reluctance to fully price back in another supply shock," ING’s Francesco Pesole noted, explaining why prices remain far below the $120 peak seen at the start of the war.
The toll, set to take effect with a resumed US blockade at 4pm ET, would cost roughly $32 million per tanker and add $16 to the price of a barrel of oil. Iran, which previously charged ships just $1 million to $2 million in crypto during its own blockade, mocked the proposal. Foreign Minister Abbas Araghchi stated that 20% was excessive and that Iran, the true "GUARDIAN" of the strait, would "be fair."
The immediate military situation remains highly volatile. Iran struck two UAE tankers and US sites in Jordan and Bahrain, while its Houthi proxies bombed Saudi Arabia's Abha International Airport. The US responded with a third night of strikes targeting Iranian coastal cities, including Bandar Abbas and Bushehr. Equity markets reflected the growing anxiety, with the Stoxx 600 falling 0.78% and the S&P 500 closing down 0.79%, though China’s CSI 300 bucked the trend by jumping 2.15%.
The muted oil reaction compared to earlier in the conflict is rooted in structural changes to Gulf infrastructure. Goldman Sachs analyst Alexandra Paulus estimates that 45% of regional exports will bypass the strait by 2027, rising to more than 60%, or 14 million barrels per day, by the end of 2028. This growing pipeline capacity could push Goldman's $76 per barrel forecast even lower over time.
The persistent threat to Middle Eastern energy flows is simultaneously accelerating a major market shift toward Chinese green technology. Beatrice Tanjangco of Oxford Economics highlighted that the crisis underscores the flaws of relying on a war zone for energy. She noted that Chinese firms already dominate the manufacturing of solar modules, battery cells, and wind turbine components, positioning them to capture surging global demand for alternative power.
