President Donald Trump reinstated the U.S. naval blockade on Iranian shipping Monday and declared that all non-Iranian cargo transiting the Strait of Hormuz must pay the United States a 20% fee, sending oil prices surging and pushing stocks lower.
Trump's announcement followed a weekend of renewed strikes between the U.S. and Iran, and came as tanker traffic through the Strait of Hormuz has collapsed
Bloomberg / Getty Images
President Donald Trump reinstated the U.S. naval blockade on Iranian shipping Monday and declared that all non-Iranian cargo transiting the Strait of Hormuz must pay the United States a 20% fee, sending oil prices surging and pushing stocks lower.
Trump announced both moves in a Truth Social post, writing that the U.S. "will be, from this point forward, known as 'THE GUARDIAN OF THE HORMUZ STRAIT,'" and that the toll would reimburse America for "any and all costs necessary to do the job of providing safety and security to this very volatile section of the World." He offered no explanation of how the fee would be collected.
Brent crude, the international benchmark, surged as much as 8% on Monday, breaking above $82 a barrel. Even so, crude has not come close to reclaiming its wartime high of nearly $120 a barrel. Iran's top military command said Washington would not be permitted to play any role in managing the strait, and the United Nations shipping agency said there is no legal basis for mandatory tolls on strait transits, according to Reuters.
The announcement followed a weekend of renewed strikes between the two countries. The U.S. military hit roughly 140 targets in Iran after Tehran attacked a container ship in the strait, according to The New York Times. Iran responded by firing at U.S. military installations in Bahrain, Jordan and Kuwait, though each country said its air defenses intercepted the incoming missiles and drones without casualties.
Tanker traffic through the strait collapsed over the weekend. Data from Kpler showed only 12 authorized crossings on Sunday, a 52% drop compared with the same period the previous weekend, according to Barron's. In the months before hostilities broke out, the strait handled upward of 100 vessel transits every day. At its prewar pace, the waterway was the conduit for roughly a fifth of the world's combined daily oil and liquefied natural gas trade.
The original blockade was dropped when Washington and Tehran signed a memorandum of understanding on June 17, a move that allowed oil shipments to resume — approximately 120 million barrels passed through the strait in the weeks that followed, according to Barron's. That ceasefire had been eroding for weeks as both sides disputed language over who controls traffic through the strait. Trump declared last week that the agreement was "over."
On Wall Street, the S&P 500 fell 0.7% and the Nasdaq $NDAQ composite dropped 1.4%. Chip stocks led the decline, with Nvidia $NVDA stock down 3.2% and Micron $MU Technology stock falling 4.9%. South Korea's Kospi index dropped 8.9%, including a 15.4% plunge for SK Hynix stock — its worst single-day decline since the company began trading in 1997.
AAA data showed the national average for a gallon of gasoline at $3.87 on Monday, compared with $3.80 the previous week. Diesel climbed to $4.88 a gallon from $4.76 the week before.
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