Donald Trump backs down on 20 percent fee to guard Strait of Hormuz

United States President Donald Trump stepped back from a proposal to charge a 20 percent fee to guard the Strait of Hormuz as part of the conflict with Iran, saying he would instead seek investment deals with Gulf states.

US forces had carried out waves of attacks for the third night in a row after Tehran said it had closed the strait, prompting Trump on Monday (US time) to reinstate a blockade of Iranian shipping and propose the fee.

But just a little under five hours before the fee had been due to come into effect at 2000 GMT (8am Wednesday NZ), Trump said the strait was open to all shipping traffic except that of Iran.

“Based on highly productive conversations with Middle East leadership, 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 said in a post on Truth Social. Oil futures prices pared their gains after the post after rising earlier on Tuesday. The worsening attacks had increased doubts that a memorandum of understanding signed last month would lead to a permanent halt in the war, which has disrupted global energy supplies and raised fears of a rise in inflation globally.

Iran had hit back by attacking a US Army base in Jordan with ballistic missiles while Bahrain, which hosts a US naval base, said it had fended off an Iranian aerial attack. Jordan said it had shot down four ballistic missiles and explosions were heard in Manama, Bahrain’s capital.

Oil prices rose again

Regional analysts said the hostilities remained within controlled boundaries for now, with both sides seeking leverage for an eventual peace deal, but that there was still a risk of fighting spinning out of control.

“I doubt the two sides will resume a full war, especially as Trump will suffer - though there is also a distinct possibility that the Iranians will overplay their hand. That is true of Trump too, of course,” said Yezid Sayigh, a senior fellow at the Carnegie Middle East Center.

The war has proved unpopular in the US, where gasoline prices have risen since the start of the war and congressional elections are looming in November. Half of those surveyed in a Reuters poll said they believed the war had not been worth its costs.

Oil prices rose again on Tuesday (US time), with Brent crude futures gaining 5 percent to hit US$87.49 per barrel - the highest since June 12 but still well below the peak since the war began - before dipping to US$86.19 per barrel.

Renewed hostilities

The US and Israel struck Iran on 28 February, and Iran attacked Israel and Gulf states that host US bases in a war that also reignited conflict between Israel and Hezbollah militants in Lebanon, killed thousands and displaced millions.

Lebanon and Israel resumed talks on Tuesday in Rome, with Beirut seeking progress towards securing an Israeli withdrawal from south Lebanon under a US-brokered deal. Israeli Prime Minister Benjamin Netanyahu meanwhile warned Iran not to attack Israel, saying it would retaliate more forcefully than before.

The US has said its renewed attacks on Iran are intended to “degrade Iran’s ability to attack commercial shipping.”

Iranian media reported US strikes on a number of cities and said four people had been wounded. Several explosions were heard in Bushehr and Choghadak, according to Fars News Agency, and IRNA quoted a provincial official as saying four areas of Bushehr city were hit.

No casualties were reported in Iran’s attack on the US Army base in Jordan, and the strike on the kingdom was on a smaller scale than at the height of the war, when it at times faced much heavier barrages.

“We have returned to the boundaries of escalation prior to signing the MoU, a low-intensity conflict that will not produce any clear victory for anyone,” said Andreas Krieg, a senior lecturer at the School of Security Studies at King’s College London, commenting on the broader regional conflict.

Hostilities have intensified since Iran said late on Saturday it had closed the Strait of Hormuz after firing a warning shot that struck a vessel travelling on what it said was an unauthorised route.

Trump reinstates blockade

Trump said on Monday the US was reinstating its blockade of Iranian shipping, which had been lifted as part of the MoU signed last month, and announced the 20 percent fee on all cargo shipped through it.

The US Navy-led Joint Maritime Information Center said the blockade would take effect at 2000GMT on Tuesday (8am Wednesday NZ). White House economic adviser Kevin Hassett said on Tuesday he did not know how the new US fees would be imposed.

Iranian Foreign Minister Abbas Araqchi wrote on X that Tehran was the guardian of the strait and would remain so “forever”, adding in response to Trump: “20% is of course too much. We will be fair.”

Before the war, about a fifth of global oil and gas traffic passed through Hormuz daily. If the US were to impose a 20 percent fee, it could generate around US$240 million a day.

The UN shipping agency said it opposed any fees for straits used in international navigation and that there was no legal basis for introducing mandatory tolls on strait transits.

The United Arab Emirates Ministry of Defence said Iranian missiles had struck two Emirati oil tankers while transiting the strait, killing an Indian crew member and wounding eight others.

Recorded transits of tankers through the strait had fallen in recent days to their lowest levels for weeks, though the level of traffic is hard to determine due to ships switching off their tracking systems.

- Reuters