By Sanchari Ghosh
Amid signs of strain in the US-Iran ceasefire over the Israeli attacks in Lebanon, President Donald Trump said on Wednesday that US military forces will remain deployed in and around Iran until Tehran fully complies with the “real agreement,” warning that any breach would trigger a military response larger than anything seen before.
Oil prices that dipped on Wednesday on optimism over the temporary ceasefire agreement jumped again after Trump’s warning.
Brent crude, the international standard, was up 3.5% to $98.09 per barrel. Benchmark US crude was 3.6% higher on Thursday at $97.83 a barrel, according to an AP report.
Global oil prices have climbed past $100 a barrel since Iran’s retaliation stalled deliveries of oil out of the Middle East.
The Strait of Hormuz, a chokepoint for energy transport where a fifth of the world’s oil typically passes, was largely closed even though the US repeatedly demanded that it must be reopened. Wednesday’s message sent a troubling signal to the oil industry.
“All US ships, aircraft, and military personnel…will remain in place in, and around, Iran, until such time as the REAL AGREEMENT reached is fully complied with,” Trump wrote on Truth Social.
…
Are consumers bracing for costlier oil and gas via Hormuz?
The oil industry is already estimating what Iran could charge to let ships pass through Hormuz. Companies may face a new “toll” to transit the route, and additionally, they could also pay higher insurance premiums due to security risks. These costs would apply to shipments of oil, gas, helium, fertilisers, and other goods.
Sam Ori, executive director of the Energy Policy Institute at the University of Chicago, notes that Iran has “demonstrated that they can close it now … they plan to use that newfound capacity to implement a cost,” Ori said. “We’ve moved into a space where things are going to be a little bit more expensive for the foreseeable future.”
Iran is reportedly charging $2 million per tanker to pass through the Strait, which equates to about $1 per oil barrel. Before the conflict, companies typically paid around $250,000 for insurance on such trips.