Oil Tops $85 a Barrel as Trump Reinstates Naval Blockade on Iran
(Bloomberg) -- Brent oil rose above $85 a barrel for the first time in a month, as US President Donald Trump reimposed a blockade on Iranian ships transiting the Strait of Hormuz and demanded payment for all other cargo.
The global crude benchmark climbed as much as 2.8% after surging almost 10% on Monday, while West Texas Intermediate traded near $80. Trump demanded a 20% reimbursement on cargoes — or roughly $30 million on full supertankers carrying oil — as US forces concluded another round of strikes against Iran that may last several more days.
Oil has rebounded to its highest in almost a month, paring a second-quarter drop of about 30%, as the escalating conflict rekindles concerns over supplies from the Gulf. Iran had managed to export at least 57 million barrels of crude during a brief gap between two American naval blockades, highlighting what’s at stake for the global oil market now that restrictions are being reimposed.
Iran has been quietly moving oil tankers through the strait over the past few days as hostilities escalated. Six US-sanctioned supertankers transited the waterway into the Gulf of Oman over the past week with their transponders turned off, according to ship-tracking data compiled by Bloomberg.
“They were just shipping oil out at unbelievable rates,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management. “We think we’ll hang around this $80 level, unless there’s some movement one way or another on the strait. But I don’t think we’ll go to, like, $90 or $100. And if the strait reopens, we’ll go to $60 in one hell of a hurry.”
European natural gas surged as much as 3.3% to the highest in more than three months. Before the conflict, about a fifth of the world’s crude and liquefied natural gas passed through the strait.
The Joint Maritime Information Center said US Central Command will begin enforcement of a blockade of all Iranian ports and coastal areas at 4 p.m. New York time on Tuesday. Trump said the US will be reimbursed by the countries it’s helping to protect in the strait, citing Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Kuwait.
Iran’s army targeted US assets in Kuwait with drones and struck “a hostile vessel” with cruise missiles, the semi-official Fars news agency reported, citing an army statement. Meanwhile, the UAE said two of its tankers were attacked in Omani waters while transiting the southern route of the strait.
Over the past month, Gulf producers had begun marketing additional crude after the interim agreement eased export concerns. The UAE in particular proved highly successful at moving barrels by utilizing shuttle tankers sailing dark, or with their transponders off.
The UAE told OPEC that it increased crude production to 3.8 million barrels a day in June, up 1.71 million barrels from May, according to a monthly report seen by Bloomberg on Monday, after finding workarounds to the Iran conflict and ramping up output following its departure from the producer group.
The conflict also showed signs of widening beyond the Strait of Hormuz. Saudi Arabia’s air defenses engaged with ballistic missiles fired by Yemen’s Houthis on the country’s southern region, Alekhbariya reported, citing a Defense Ministry spokesman. Earlier, the Houthis said a Saudi airstrike hit Sanaa International Airport and vowed retaliation, opening another potential front in the area.
Elsewhere, Trump will support a Russian sanctions bill championed by the late Senator Lindsey Graham, according to a White House official who spoke on condition of anonymity. That would revive efforts to penalize buyers of Russian oil and natural gas and increase pressure on the Kremlin to end its war with Ukraine.
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