Trump reinstates US blockade of Strait of Hormuz
Donald Trump said the United States has restored its blockade of Iranian ships in the Strait of Hormuz and would demand a 20 per cent fee on all other cargo transiting the shipping lane.
In a further breakdown of relations with Iran, the President said the US Navy would stop “Iran’s ships entering or leaving” through the all-important chokepoint. He also promised to introduce a service charge on all other ships to cover the country’s costs for doing so.
“We are reinstating the THE IRANIAN BLOCKADE, so named because it is only stopping Iran’s ships or customers from entering or leaving,” Trump wrote on his social media website Truth Social. “All other countries will have fair and open use of the Strait. The USA will be, from this point forward, known as ‘THE GUARDIAN OF THE HORMUZ STRAIT,’ but as such, and as a matter of FAIRNESS, will be reimbursed, at the rate of 20 per cent on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World.”
The intervention sent the price of both oil benchmarks up by as much as five per cent, carrying Brent above $80 a barrel for the first time since the US and Iran agreed to a 60-day ceasefire deal in June.
The truce had been constantly under threat throughout its short existence. And last week Trump declared it over and exchanged several rounds of strikes with Iran, the latest of which took place on Sunday night.
Hormuz volte-face sparks spike in bond yields
Opening the vital Strait of Hormuz has been the totemic flash point of the highly charged negotiations between the US and Iran. Before conflict first broke out in February, the shipping lane had provided passage for roughly a fifth of the world’s seaborne oil and gas cargo.
Iran has used the Strait as a key piece of leverage throughout the fraught talks, laying sea mines and threatening to charge expensive tolls to prevent western tankers from transiting to and from the Persian Gulf.
Trump’s latest intervention also triggered a sell-off in government bonds, as traders scrambled to factor in the higher likelihood that sustained inflation would eat into returns and force central banks to keep interest rates higher for longer. Moves were particularly pronounced across shorter-dated bonds. The yield applied to UK’s two-year government gilt climbed by more than 10 basis points, spiking after the President’s social media post.
The US’s move to apply a charge on all traffic contradict the Trump administration’s previous calls for the strait to be opened up to free-flowing traffic. Secretary of state Marco Rubio said last month that “no country” should be “allowed to charge tolls or fees on an international waterway” and that to do so would be in breach of international law.