NEW YORK: Oil prices pared earlier gains Tuesday after President Donald Trump withdrew a proposal to charge commercial vessels a 20% protection fee for transiting the Strait of Hormuz, opting instead to pursue trade and investment agreements with Gulf nations.
US benchmark West Texas Intermediate (WTI) crude rose 1.82% to $79.56 per barrel, while Brent crude, the international benchmark, gained 1.98% to $84.95 per barrel after retreating from session highs.
In a post on Truth Social, Trump said he had decided to replace the proposed reimbursement fee with trade and investment deals following what he described as productive discussions with Middle Eastern leaders.
The proposal, announced a day earlier, had called for commercial ships to pay the fee in exchange for protection by the U.S. Navy while passing through the strategically important waterway.
The proposal had marked a departure from longstanding US opposition to transit tolls in the Strait of Hormuz.
The International Maritime Organization has maintained that mandatory transit fees in the waterway are illegal, while Iran has agreed not to impose similar charges for 60 days under an interim agreement with the United States.
Oil prices remained supported by escalating tensions in the Gulf. US crude briefly traded above $80 per barrel earlier in the session as Washington and Tehran continued to vie for influence over the strait.
US Central Command said American forces struck targets along Iran’s coast on Monday to reduce Tehran’s ability to attack commercial shipping.
Iran’s Revolutionary Guard said it targeted two supertankers traveling through the Strait of Hormuz with their transponders switched off.
The United Arab Emirates’ state-owned oil company, ADNOC, said two of its tankers were struck by projectiles while transiting the waterway, leaving one crew member dead and several others injured.
Analysts warned that uncertainty surrounding the Strait of Hormuz could continue to support higher oil prices. Citi said the earlier proposal to impose shipping fees had increased the risk of further military escalation and cautioned that prolonged geopolitical tensions could keep crude prices elevated for an extended period.
More read, Shipping executives warn Trump’s Hormuz toll plan could backfire
The Strait of Hormuz remains one of the world’s most critical energy chokepoints, with about one-fifth of global oil supplies normally passing through the narrow waterway.
