Oil prices remained elevated Tuesday after President Donald Trump abandoned plans to impose a 20% transit fee on cargo moving through the Strait of Hormuz, while the U.S. intensified pressure on Iran by resuming its shipping blockade and launching a new round of military strikes.
Brent crude settled nearly 2% higher at $84.73/bbl, its highest level in about a month, as traders continued to price in geopolitical risk despite the White House’s decision to withdraw the proposed transit charge.
Trump announced the reversal one day after unveiling the fee, saying it would be replaced by future trade and investment agreements with Gulf states.
“I have decided to replace the 20% United States Reimbursement Fee with Trade and Investment Deals that the various Gulf States will be making into the United States,” Trump said in a social media post, without identifying participating countries or detailing the expected investments.
The proposal had raised concerns across global energy and shipping markets because the Strait of Hormuz handles roughly one-fifth of the world’s oil supplies.
Even as the administration withdrew the transit fee, the U.S. resumed its blockade of Iranian shipping to and from the country’s ports and coastal areas, effective Tuesday afternoon. American forces also carried out a fresh wave of strikes on Iranian targets intended to reduce Tehran’s ability to threaten commercial shipping through the waterway.
Trump later told reporters he changed course after discussions with representatives from Saudi Arabia, Qatar, Bahrain, Kuwait and the United Arab Emirates, who encouraged the administration to pursue alternative arrangements.
“I don’t like the concept of a fee,” Trump said. “They’re going to be making massive investments into the United States, and I like that much better.”
U.S. Energy Secretary Chris Wright confirmed the transit fee proposal was “off the table.”
The policy reversal did little to ease concerns over the security of global oil supplies, with analysts continuing to focus on escalating military activity and the potential for further disruptions in the world’s most important energy transit corridor.
The proposed fee had also drawn criticism from shipping and energy industry participants, who questioned both its practicality and its potential impact on global crude and liquefied natural gas trade. Analysts warned that any new charges on Hormuz transits would likely increase transportation costs while setting a precedent for tolls in other international waterways.
Although the transit fee has been shelved, administration officials indicated other mechanisms to secure compensation related to U.S. naval operations in the region could still be considered, leaving uncertainty over future policy as tensions between Washington and Tehran continue.