Global oil markets were volatile on Tuesday, reflecting investor unrest over Iran’s possible plan to impose permanent fees on ships passing through the Strait of Hormuz as part of a peace deal with the United States.
International prices for Brent crude rose while WTI fell as traders tried to reconcile Tuesday’s new U.S. attack on Iran, which Central Command called a “defensive strike,” with President Donald Trump’s hints last weekend that a peace deal could be on the horizon.
The complicated story unfolds amid speculation that Iran’s government may seek to collect fees from ships transiting the vital sea route as part of a permanent solution to its three-month-old conflict with the United States.
“People are afraid to take a position because there’s mixed messages about the status of the negotiations,” said Dave Arnsberger, president of S&P Global Energy.
One possible plan involves Iran and Oman jointly regulating the strait and imposing so-called “environmental fees,” or transit fees, on ships.
“This is an interesting question… whether global markets, market participants and governments are willing to tolerate any kind of transit fees or tolls at all,” Ernsberger said on CNBC’s “Squawk Box Europe” on Tuesday.
“What’s really at issue here is the principle of freedom of maritime circulation and what kind of precedent it sets.”
brent crude oil Global price indicators, seen as more sensitive to supply constraints in the Middle East, rose 2.5% to $98.47 a barrel on Tuesday after Iran’s Islamic Revolutionary Guards Corps said it would retaliate for the U.S. attack.
“Trade tax”
There are not yet enough details about how such charges will work.
Iranian Foreign Ministry Spokesman Esmail Baghaei told ABC Australia at a press conference that “there will be no tolls,” but that “navigation and ecosystem conservation in the straits, the Persian Gulf and the Sea of Oman will be costly.”
About a fifth of the world’s offshore oil supplies pass through the Strait, a narrow waterway between Iran and Oman.
“People are talking about the cost of crude oil shipping and Strait exit being about $1 a barrel,” Ernsberger said.
He said a dollar-per-barrel tax “is not a huge tax on trade” in a world where oil prices reach $120 a barrel. “But if we go back to the $55 a barrel market we saw in December, there will be even more fees to consider.”
He said this would effectively result in either adding $1 per barrel to the price paid on world markets or producers would have to absorb the fee in export costs.
Amena Bakr, Kepler’s head of Middle East energy and OPEC+ insights, appeared on CNBC’s “Europe Early Edition” on Tuesday and said rising uncertainty and “mixed messages around the negotiations” were accelerating oil price volatility.
Brent crude oil.
“I don’t know what this framework would look like,” she said of possible levy plans.
Even if a deal is reached to reopen the strait, questions remain about how stable and reliable oil shipments will be.
Ernsberger said some ships are still passing through the Strait of Hormuz, but traffic is about 10% of normal pre-war levels.
“The reality is that very few crude oil tankers or product tankers will be able to get through,” he explained. “If you have 10 ships operating in a day, you’d be lucky if two of them are oil tankers.”
He added that oil production in parts of Qatar, Iraq and Saudi Arabia could take about two months to normalize, while shipping volumes are not expected to return to normal until the fourth quarter.
Meanwhile, Bakr said it could “optimistically” take two months to clear the backlog. “Realistically speaking, it would take a year of recovery for supply to reach pre-war levels.”
