President Donald Trump has abandoned his threat to impose a 20% fee on cargo transiting the Strait of Hormuz. The reversal comes just hours before the United States was set to reinstate a blockade on Iranian ports.
Trump announced on social media that the proposed fee would be replaced by trade and investment deals with Gulf states. "I have decided to replace the 20% United States Reimbursement Fee with Trade and Investment Deals that the various Gulf States will be making into the United States," he wrote. "Those Investments will be MASSIVE but, at the same time, extraordinarily good for them, and their future." He provided no further details on these potential deals.
Trump also stated that the Strait "is open to ALL Ship traffic except for Iran" and that "oil is flowing like never before, thanks to the awesome Power of the United States Military." He had previously declared the U.S. as the "guardian" of the waterway and vowed to impose the charge to cover protection costs.
The shift in strategy follows renewed strikes between the U.S. and Iran, which have led to a significant increase in oil prices and a near standstill in tanker traffic through the vital strait. The U.S. Central Command (Centcom) had announced that a naval blockade on Iranian ports would commence at 16:00 Eastern Time on Tuesday.
Trump indicated his change of plan was influenced by calls from Gulf leaders. "I don't like the concept of a fee, but at the same time, it's not fair that we're protecting this Strait for the entire world," he said after talks in Washington with the new Iraqi Prime Minister Ali al-Zaidi.
The strategic importance of the Strait of Hormuz has been highlighted by recent events. Iran accuses the U.S. of interfering with its management of the waterway, while controlling it allows Tehran to potentially disrupt global trade. Approximately 25% of the world's oil and 20% of global liquefied natural gas previously passed through the strait.
Shipping data indicates that traffic through the Strait has slowed to a two-month low, with the benchmark Brent Crude oil price rising sharply. The U.S. had carried out strikes to degrade Iran's ability to target shipping in the region. Iran's state media reported explosions in multiple cities, including Bushehr, home to a nuclear power plant, and claimed to have targeted U.S. military facilities in Bahrain and Jordan after earlier strikes on two United Arab Emirates tankers. In a separate development, Israeli Prime Minister Benjamin Netanyahu warned that Israel's retaliation against Iran would be significantly more forceful if attacked first.