Trump vows Hormuz annexation as strait traffic drops 80%

President Donald Trump said Friday he will declare the Strait of Hormuz a US territory once Iran is defeated, extending US control over a waterway where traffic has fallen 80 percent since February.

"After we finish defeating Iran, which is being very badly defeated — pretty soon I'll be declaring the Hormuz Strait a territory of the United States," Trump said at a rally at the Nassau County Police Academy in Garden City, New York. "It's true," he added with a chuckle.

Trump also defended higher fuel prices as a necessary cost of preventing Tehran from acquiring nuclear weapons, saying he will "never apologize. I did the right thing." The remarks come after a preliminary peace deal signed June 17 collapsed last month when Iran opened fire on commercial vessels using a sea lane preferred by the US. As of Aug. 12, only 3,371 vessels had crossed the strait in the 166 days since the war began — roughly 20 percent of pre-war traffic volumes, according to Kpler data cited by CNN.

The Strait of Hormuz handles roughly 20 percent of global oil consumption, making any sustained disruption a direct threat to crude prices, shipping costs, and inflation expectations. Trump previously floated renaming the waterway "the Strait of America" in March after US allies resisted an international effort to break Tehran's grip on the bottleneck.

Trump said the US naval blockade of the strait remains in place, claiming "no ships get through unless we want them to." On Aug. 12, he posted on social media that "the US completely controls the Strait of Hormuz... Iran can do nothing about it."

Iran disputes that assessment. The spokesperson for Iran's Khatam al-Anbiya Central Headquarters said Aug. 13 that the strait is under Tehran's "complete control" and that no vessel can pass safely without Iranian permission. Iran's central military command separately called US claims of control "baseless lies and fabrications."

War Escalation Reshapes Energy Flows

The US and Israel launched the war against Iran on Feb. 28 with stated aims of ending Tehran's nuclear program and triggering a popular uprising. Iran responded by establishing de facto control over much of the strait, a vital passageway for global energy and commodity shipping.

A Pakistan-brokered ceasefire in April led to the June 17 preliminary deal, but negotiations stalled over disagreements on security guarantees and freedom of navigation. From July 8 to 24, the two sides exchanged more military strikes, with Washington attacking targets inside Iran and Tehran striking what it described as US military facilities in Jordan, Bahrain, and Kuwait.

Trump acknowledged deploying the US military "a little bit more than I wanted to" but insisted continued military action is necessary. "We cannot let Iran have a nuclear weapon," he said.

Oil Risk Premium Builds

The annexation threat adds a fresh geopolitical premium to crude markets already pricing in supply disruption risk. The last time the strait faced a comparable threat was during the 2019 tanker attacks, when Brent crude spiked more than 14 percent in a single week before the situation cooled. This time, with traffic already at one-fifth of normal levels and active military exchanges ongoing, the risk premium could prove more persistent.

For global markets, the stakes are direct: higher crude prices feed into inflation expectations, push central banks to keep rates higher for longer, and squeeze import-dependent economies. Shipping insurers have already adjusted war-risk premiums for vessels transiting the region, and any formal US claim of territorial control would likely trigger further repricing across energy, freight, and defense sectors.

Equity markets have priced in a sustained conflict. Defense contractors and energy producers have outperformed the broader S&P 500 since February, while airlines and consumer discretionary names have lagged on fuel cost concerns. The dollar has strengthened against import-dependent emerging market currencies, and gold has held near record levels as investors hedge against further escalation.

The annexation pledge also carries domestic political weight. Trump was speaking at a rally for Republican candidates in New York's gubernatorial and congressional elections, where energy prices and foreign policy are central campaign issues. A prolonged conflict with elevated fuel costs could test voter patience, even as Trump frames the war as a necessary price for nuclear non-proliferation.

The immediate question is whether Trump's declaration represents actual policy or rhetorical posturing. Either way, the market impact is measurable — and the window for de-escalation is narrowing as both sides claim exclusive control over the same waterway.

This article is for informational purposes only and does not constitute investment advice.