Oil gains over 2% as Mideast tensions and Hormuz toll prospects raise supply worries

Oil prices rose on Tuesday after U.S. President Donald Trump announced plans to impose shipping fees in the Strait of Hormuz and reinstate a blockade of Iranian ports, raising concerns over potential disruptions to global crude supplies. 

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

Trump said Monday that the U.S. will levy fees on ships transiting the Strait of Hormuz, charging "at the rate of 20% on all cargo shipped," after describing the United States as the "guardian" of the vital oil transit route.

In a post on Truth Social, Trump also announced that Washington would reinstate its blockade of Iranian ports near the strait, further escalating the conflict with Tehran. U.S. Central Command later said the blockade would take effect at 4 p.m. ET on Tuesday.

Citi warned that Trump's proposal to impose shipping fees in the Strait of Hormuz materially raises the risk of further military escalation.

"The possibility that the Iranian regime walks away from the MoU until after the mid-term US elections has also risen, a scenario which would most likely see higher for longer oil prices," the bank wrote in a report published early Tuesday.

Roughly one-fifth of global oil supplies passed through the Strait of Hormuz before the U.S. and Israel launched strikes on Iran on Feb. 28. Shipping traffic slumped after Iran began targeting vessels in the waterway in early March, but had started to recover following Washington and Tehran's interim agreement.