President Trump’s Hormuz toll plan puts oil supply risks back in the spotlight

President Donald Trump’s plan to impose a 20% fee on cargo transiting the Strait of Hormuz threatens global oil surpluses, especially if renewed fighting closes the vital waterway again.

Analysts said the proposed levy was less about its direct costs and more about what it implied: the growing risk that disruptions to shipping through the Channel could lead to supply shortages, upending the surplus forecast it issued earlier this month.

Andy Lipau, president of Lipau Oil Associates, said on CNBC’s “Squawk Box Asia” that while the market had been hoping for an increase in supply following the memorandum of understanding between the United States and Iran signed last month, optimism has waned.

“These surpluses are certainly at risk, especially if the Strait closes completely.”

Lipau estimates that if President Trump’s proposed fee were applied to crude oil cargoes, it would effectively add about $16 per barrel to oil shipped through the strait, but the government has not yet disclosed how the fee would be implemented.

Citi warned that impacting this fee could also increase the likelihood of a wider military conflict in the near future.

“It is our view that this announcement, if implemented, significantly increases the risk of military escalation,” Citi said in a memo published early Tuesday.

Citi analysts added: “It is also increasingly likely that the Iranian regime will withdraw from the Memorandum of Understanding until after the US mid-term elections, and this scenario is most likely to rise further if oil prices persist.”

Other experts said the proposed tax would increase shipping costs, while investors were increasingly focused on the possibility that the escalating conflict could force kegs to be removed from the market altogether.

“While the immediate impact is clearly supporting oil prices, the bigger issue is the risk of another physical supply loss,” said Henry Hoffman, co-portfolio manager of the Catalyst Energy Infrastructure Fund.

U.S. West Texas Intermediate futures for August rose 2.27% to $79.91 per barrel. International benchmark Brent crude oil futures for September delivery rose 2.14% to $85.11, extending gains after rising 9.6% in the previous session.

Hoffman warned that if oil cannot be exported and storage is full, producers could eventually be forced to cut production due to reduced shipping traffic. Shipping traffic through the Strait of Hormuz plummeted on Sunday, with just 14 vessels, including four oil tankers, crossing the waterway, compared to 37 a week ago, according to Kupler data.

Hoffman said if exporters are unable to ship crude from the Gulf, storage tanks will eventually fill up, leaving producers with little choice but to temporarily halt production. “As such, the effective supply loss could be much larger than what can be measured simply by looking at damaged infrastructure.”

The latest developments will also undermine hopes from the International Energy Agency and others that the global oil market will remain comfortably supplied. Just last week, the IEA announced that it expects the oil market to return to surplus by the end of 2026, but the outlook depends on a gradual recovery in tanker traffic through the strait.

It added that the timing could be particularly difficult if demand in Asia recovers at the same time supply in the Middle East becomes unstable. “Saudi Arabia recently changed its key grades of Asian crude from huge premiums to discounts, which should encourage Chinese refiners to increase their purchases after imports fell sharply during the initial disruption.”

Saudi Aramco recently cut its prices by $11 per barrel, giving it a $1.50 discount to the Oman/Dubai benchmark.

“In other words, Chinese demand could start to recover at the same time that supply reliability in the Middle East deteriorates again.”