Oil prices have surged while copper has advanced and gold has declined.
WTI crude spiked after former U.S. President Donald Trump suggested imposing a 20% toll on vessels transiting the Strait of Hormuz. Copper prices rose as traders temporarily set aside concerns that escalating U.S.-Iran tensions could dampen demand, focusing instead on recent signs of tightening supply. Gold fell as renewed U.S.-Iran conflict and comments from Federal Reserve Governor Christopher Waller bolstered market expectations that the Fed might raise interest rates to curb inflation.
Oil: WTI Soars on Proposed Hormuz Toll
Crude oil surged, posting its largest gain since April, after former U.S. President Donald Trump indicated plans to reimpose a blockade on Iranian vessels and levy a fee on all other cargo transiting the Strait of Hormuz, dashing recent hopes for a swift restoration of shipping flows.
WTI futures climbed 9.4%, settling near $78 per barrel, their highest level in nearly a month. Brent crude closed above $83. These moves reinforced bullish momentum for oil prices, following weekend retaliatory strikes between the U.S. and Iran, including attacks on energy infrastructure, which largely extinguished hopes that mid-June de-escalation would normalize transit through the critical waterway.
In a social media post, Trump stated the Strait of Hormuz "will remain open with or without Iran," and said Washington would become the "guardian" of the passage. He also called for a 20% compensation fee on all other cargo shipped through Hormuz. Earlier, he told Fox News that the U.S. might attempt to take control of the chokepoint.
"Reinstating the blockade is another step in escalation, forcing crude to reprice geopolitical risk," said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. "The proposed 20% toll is eye-catching, but the market is still waiting to see how it would be implemented, who bears the cost, and how other Gulf producers will respond."
More than a dozen shipping market participants said Trump's announcement of a potential fee on cargo passing through the strait caught them off guard and left them confused. Several of these individuals have had vessels transit the strait in recent weeks. They noted it is currently impossible to judge what the plan would actually entail or how it would affect their transit decisions.
The White House did not provide further details on Trump's toll proposal, including how it would be implemented or whether U.S. allies in the Gulf region had been informed.
Meanwhile, the Joint Maritime Information Center stated that U.S. Central Command would begin a blockade of all Iranian ports and coastal areas starting at 4 p.m. ET on Tuesday.
Analysts warned that reimposing the blockade could prompt Iran to increase attacks on vessels attempting to pass through the Strait of Hormuz. Ship-tracking data showed the number of vessels transiting the strait on Sunday fell to its lowest in a month, although many ships were not broadcasting satellite signals while passing through.
At current oil prices, a 20% toll would equate to approximately $32 million for a very large crude carrier. This is significantly higher than the maximum fee of around $2 million that Iran has reportedly charged, according to informed sources. The resulting higher shipping costs could be reflected in oil prices.
In a related development, Yemen's Houthi group stated on Monday it launched ballistic missiles and drones at an airport in Saudi Arabia, calling the attack a response to a prior Saudi strike on Sanaa International Airport.
Saul Kavonic, senior energy analyst at MST Marquee, said oil prices could approach $100 per barrel if the conflict broadens to more extensively target critical infrastructure.
In New York, WTI crude for August delivery rose 9.4% to settle at $78.14 per barrel.
Brent crude for September delivery gained 9.6%, settling at $83.30 per barrel.
Base Metals
Copper prices advanced as traders temporarily downplayed concerns that escalating U.S.-Iran tensions could hurt demand, shifting their focus to recent indications of tightening supply.
The heightened Middle East tensions have amplified worries about rising energy costs and persistent supply disruptions in the Persian Gulf, which could push inflation higher and potentially prompt central banks to raise interest rates. Higher borrowing costs typically dampen demand for industrial metals from manufacturers.
However, Ryan McKay, senior commodity strategist at TD Securities, noted that the physical market has tightened in recent days due to stockpiling ahead of Typhoon Bavi's landfall.
"Copper prices have been immune to the broader risk-off sentiment as investors remain focused on supply tightness and trade-related disruptions," said Ewa Manthey, commodity strategist at ING Bank.
At the close, LME three-month copper was up 0.4% at $13,541 per metric ton.
LME aluminum rose 1% to $3,169.5 per ton.
LME nickel gained 0.2% to $16,766 per ton.
LME zinc fell 1.4% to $3,566 per ton.
LME tin declined 1% to $52,598 per ton.
LME lead dropped 1.5% to $1,868.5 per ton.
Precious Metals
Gold prices retreated as renewed U.S.-Iran conflict and remarks from Federal Reserve Governor Christopher Waller strengthened market expectations that the U.S. central bank might increase interest rates to combat inflation.
The price of gold fell as much as 3.2%, breaching the $4,000 per ounce level and marking its largest intraday drop since June 24.
Fed Governor Christopher Waller stated that if underlying inflation continues to indicate broad-based price pressures, policymakers may need to raise interest rates in the near term.
The interest rate swaps market now prices in a 43% probability of a rate hike at the Fed's July meeting, up from nearly 40% prior to Waller's comments.
As of 4:37 p.m. ET, spot gold was down 2.9% at $3,998.63 per ounce.
Spot silver declined 3.8% to $57.5705 per ounce.
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