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The United States and Iran have moved in ways that effectively scrap the ceasefire memorandum of understanding (MOU) that took effect on the 18th of last month (local time), sending international oil prices swinging once again. In particular, as U.S. forces have relentlessly bombarded Iran since the 7th of this month, President Donald Trump's declaration of a Strait of Hormuz blockade and a 20% transit toll has again rattled global oil prices. Analysts say the Federal Reserve's monetary policy path—set based on energy prices that had fallen to pre-war levels following the ceasefire MOU—now stands a greater chance of being thrown off course.
Trump abruptly pivots to a 20% Strait of Hormuz toll... international oil prices jump 10%
On the 13th, on London's ICE Futures exchange in the U.K., Brent crude futures for September delivery settled at $83.30 per barrel, surging 9.6% from the previous session. Brent at one point during the session soared to $83.54 per barrel, reaching its highest level since the 16th of last month, just before the U.S.-Iran ceasefire MOU was signed. On the New York Mercantile Exchange, U.S. West Texas Intermediate (WTI) futures for August delivery also closed up 9.4% at $78.14 per barrel.
International oil prices climbed sharply that day because the United States, citing Iran's strikes on ships in the Strait of Hormuz, said it would blockade the waters and collect a toll of around 20%. President Trump posted on his social media platform Truth Social that day, saying, "The Strait of Hormuz is open, with or without Iran, and we are blockading Iran again," adding, "We will be compensated with 20% of the entire shipped cargo for all costs needed to provide safety and security in this very unstable region." He continued, "The relevant procedures and structures will begin immediately," adding, "From now on, the United States will be called the 'Guardian of the Strait of Hormuz.'"
Earlier, in a telephone interview with Fox News, Trump also said, "We have been protecting the strait for free all this time, but from now on we will be paid enormous money in return," adding, "The other countries are very wealthy, and they are on our side." Regarding this, CNN assessed that it amounts to "imposing 20% of the cargo's value on commercial shippers."
Trump's move also contradicts the contents of the MOU. Article 5 of the ceasefire MOU states that "Iran shall take the necessary measures to resume passage through the Strait of Hormuz, which was blockaded during the war." U.S. Secretary of State Marco Rubio also strongly criticized Iran's attempt to impose Strait of Hormuz transit fees during a visit to the United Arab Emirates (UAE) on the 23rd of last month, saying, "Under current international law, no country can impose tolls or fees on an international waterway."
U.S. Central Command (CENTCOM), which oversees U.S. military operations in the Middle East, also said on X (formerly Twitter) that day, "In accordance with the direction of the Commander-in-Chief (President Trump), we are resuming the blockade of maritime traffic entering and leaving Iranian ports," announcing the measure would resume from 4 p.m. on the 14th (5 a.m. on the 15th Korea time). The Trump administration had previously cut off Iran's funding once by blockading all ships traveling to or from Iranian ports or coasts from April 13 to the 18th of last month.
In response, a spokesman for the Imam Khomeini Central Command under Iran's Islamic Revolutionary Guard Corps (IRGC) pushed back in a statement, saying, "We will absolutely not allow the United States to intervene in the management of the Strait of Hormuz." Earlier, the IRGC also issued a statement on the 12th saying, "Multiple ships ignored warnings to move along authorized routes," adding, "Since instability has arisen from illegal foreign intervention, the Strait of Hormuz will be fully closed until further notice, until foreign intervention in the region ends."
No detailed explanation of U.S. maritime strategy either... national address foreshadowed for the 16th
Trump's sudden declaration of a maritime transit toll has greatly increased uncertainty over international oil prices. That is because Trump did not explain in detail how the U.S. would guarantee safe passage or how the 20% rate would be calculated. It is also unclear exactly which "wealthy allies" Trump referred to as targets of the toll. Amid such conditions, according to U.S. Department of Energy statistics, the U.S. Strategic Petroleum Reserve (SPR) stood at 316.5 million barrels as of last week, down 3 million barrels from a week earlier, remaining at its lowest level since April 1983.
Trump then posted again on Truth Social announcing that he would deliver a national address at 9 p.m. on the 16th (10 a.m. on the 17th Korea time). He did not mention the topic of the address, but judging by the mood that day, it appears highly likely that the main content will be his response strategy toward Iran. Trump's last national address was on April 1. In that address, Trump declared a policy of striking Iran extremely hard for two to three weeks.
Trump further appeared on the conservative radio channel "The Hugh Hewitt Show," arguing, "We will hit Iran hard tonight and tomorrow too," and "There is nothing Iran can do about it except talk big." He continued, "The MOU doesn't mean much because it is concluded as a step before the main ceasefire agreement," pointing out, "It was a kind of test, and Iran did not respect that test and failed to pass it."
The U.K.'s Financial Times (FT) also reported that DP World, a logistics company owned by Dubai in the UAE, is planning to build a new port and container terminal on the country's east coast to bypass the Strait of Hormuz, where uncertainty has grown. The explanation was that after Iran closed the Strait of Hormuz, cargo volume at Jebel Ali Port—the Middle East's largest logistics hub—plunged 90–95%, prompting the search for alternatives. Most of the UAE's oil volume passed through Khalifa Port and Jebel Ali Port, which can only function properly if ships pass through the Strait of Hormuz.
The background behind Trump's sudden pivot toward collecting a transit toll amid ceasefire negotiations is unclear. What is certain is that since the MOU was signed, Iran has pressured the United States several times using its control over the Strait of Hormuz. For Trump, there is neither the capacity to wage an all-out war including a ground campaign, nor a reason to sustain a prolonged standoff ahead of the November 3 midterm elections. Moreover, with more than 20 of the 60-day follow-up negotiation period already passed, it is difficult to expect a sweeping agreement on core issues such as scrapping Iran's nuclear program in the remaining time. The only strategies left are the extreme cards of re-blockading Iranian ports and collecting strait fees, at the cost of a renewed surge in U.S. gasoline prices.
With the Middle East exit blocked, extreme card apparently played... June CPI significance fades as rate-hike odds rise
Trump's change in his approach to Iran was triggered by the Islamic Revolutionary Guard Corps' attack on a liquefied natural gas (LNG) carrier belonging to Qatar, the mediating country, in the Strait of Hormuz on the night of the 6th. In response, on the 7th the U.S. Treasury's Office of Foreign Assets Control (OFAC) immediately revoked the temporary license—issued on the 21st of last month—permitting the production, delivery, and sale of Iranian crude oil. Also, U.S. Central Command began massive airstrikes on Iran from that same day. The two countries had also engaged in two days of armed exchanges in the Strait of Hormuz on the 26th and 27th of last month, citing Iran's attack on a tanker, but that did not drag on as long as this time.
Iran also struck back, hitting neighboring Middle Eastern countries hosting U.S. military bases. Iran's Supreme Leader Ayatollah Seyyed Mojtaba Khamenei issued a written message on the 11th related to the funeral of his father, former Iranian Supreme Leader Ayatollah Ali Khamenei, stressing, "We vow revenge for the pure blood of all the martyrs who fell victim to the vicious and shameful murderers in the two wars," adding, "This revenge is the demand of our people and must be carried out." With this, the meaning of the existing MOU has largely been lost.
Yemen's pro-Iran Houthi rebels attacked Saudi Arabia's Abha International Airport on the 13th using ballistic missiles and drones. Houthi military spokesman Yahya Saree warned all airlines worldwide that day not to enter Saudi airspace. The explanation was that it was retaliation for Saudi Arabia's strike on the international airport in Sanaa, Yemen's capital.
As Trump once again shakes up the Middle East situation, the Fed's rate path has also been plunged into a fog. In fact, the Chicago Mercantile [BODY]
According to the CME's FedWatch Tool, the federal funds futures market raised the probability that the Federal Reserve will hike rates by 0.25 percentage point at the Federal Open Market Committee (FOMC) meeting on the 28th and 29th to 41.7% from 34.2% the previous day. That is far higher than the 8.3% seen a month ago. In contrast, the probability of a rate hold fell to 58.3% from 65.8% in a single day. The probability of a rate hold at the July FOMC had stood at 89.3% as recently as the 12th of last month, just ahead of the June FOMC.
If the current trend continues, the significance of the June Consumer Price Index (CPI) and Producer Price Index (PPI) — due out on the 14th and 15th — is also likely to fade. Wall Street expects both indicators to have eased somewhat, given that international oil prices stabilized quickly after last month's ceasefire memorandum of understanding between the United States and Iran. Fed Governor Christopher Waller, who was classified as a leading dove (favoring monetary easing) back when he was floated as a candidate for Fed chair, said at an event in New York that day: "Monetary policy stands at a crossroads amid inflationary pressures from tariff policy, rising energy prices, and the expansion of artificial intelligence (AI) infrastructure." He added, "If the core inflation figures released this week come in high once again, the FOMC will need to consider short-term monetary tightening measures."
With the Trump administration — which had until now sharply criticized Iran's control of the Strait of Hormuz — abruptly shifting its stance, the likelihood has grown that the international crude oil market and capital markets as a whole will see more volatile movements for some time. Above all, as the view that the Fed will tighten spreads, the fallout could shake global financial markets as a whole, including South Korea.
※ "Trump Stocker" is a column delivering on-the-ground stories and issue analysis related to U.S. markets, companies, policy, politics, and diplomacy that can help with investing in the era of President Donald Trump. Subscribe to receive useful news from the United States.
