Trump Weighs Military Escort for Oil Tankers as Strait of Hormuz Remains Closed

Oil prices rose today as the US-Israeli war with Iran disrupted Middle East supplies, but the pace of gains slowed after President Donald Trump suggested the US Navy could escort vessels through the Strait of Hormuz. Brent crude rose $2.67, or 3.3%, to $84.07 a barrel, while US West Texas Intermediate crude rose $2.24, or 3%, to $76.80. Both benchmarks have risen more than 5% in the past two sessions.

Escalating Tensions and Oil Supply Concerns

The primary driver for oil prices remains the US-Iran conflict, according to OANDA senior market analyst Kelvin Wong . Clear signs of de-escalation are currently lacking. Israeli and US forces struck targets across Iran, prompting retaliatory strikes from Iran against energy infrastructure. This region accounts for just under a third of global oil production.

Iraq’s Production Cuts Add to Supply Worries

Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries (OPEC), has cut output by nearly 1.5 million barrels a day, roughly half its production, due to storage limits and export route issues . Officials warn the country may have to shut down its nearly 3 million barrels per day of output if exports do not resume.

Strait of Hormuz Effectively Closed

Iran has targeted tankers in the Strait of Hormuz, a crucial waterway through which approximately one-fifth of the world’s oil and liquefied natural gas flow . Traffic through the Strait remains effectively closed, with Iran’s Revolutionary Guards threatening to set ablaze any ships attempting passage .

Trump’s Response: Navy Escorts and Financial Guarantees

President Trump announced the US Navy could begin escorting oil tankers through the Strait of Hormuz if necessary . He similarly directed the US International Development Finance Corporation (DFC) to provide political risk insurance and financial guarantees for maritime trade in the Gulf . The president stated the US will ensure the free flow of energy to the world, emphasizing US economic and military strength .

Industry Reaction and Concerns

Analysts at ING noted that while the news is welcome, naval escorts won’t be implemented overnight . Some analysts question whether these measures will significantly curb the upward trend in oil prices .

Global Response and Alternative Supply Routes

Countries and companies are actively seeking alternative routes and supplies. India and Indonesia are exploring other energy sources, while some Chinese refineries are shutting down or accelerating maintenance plans . US crude stocks rose by 5.6 million barrels last week, exceeding analyst projections of 2.3 million barrels.