Trump's Iran sanctions squeeze Hormuz oil as Brent tops $91

Trump's declaration of the most crushing economic operation ever against Iran threatens to upend Hormuz oil flows just as a covert US corridor restored them to 10 million barrels a day, half pre-war levels.

"The threats of 'economic action' against Iran are intended to divert attention from US fiscal problems, including high debt and rising interest costs," Iranian Foreign Minister Abbas Araghchi said on social media Thursday, dismissing the escalation as a policy that "will only bring more failure."

Brent crude traded at $91.90 a barrel Wednesday after Trump called for halting negotiations with Tehran, with US crude futures climbing 1.05 percent to about $85.80. The waterway, effectively closed since early March, carried just 4.9 million barrels a day in the second quarter versus 21.6 million before the war.

The standoff leaves global energy markets exposed to a supply shock that has already pushed gasoline and diesel prices higher across the US and Europe, with Trump vowing to maintain the naval blockade and sanction any nation providing Iran a "lifeline."

The escalation, announced Wednesday on Truth Social, targets any nation whose financial institutions, companies or government entities provide Iran with a "lifeline," threatening "tremendous economic consequences." Trump listed oil smuggling, swap lines, cash transfers, exchange houses, ship registries and front companies as activities that "need to stop NOW," calling it an "ECONOMIC D-DAY."

Treasury Secretary Scott Bessent said the president ordered the department to apply "maximum pressure" on the Iranian regime, combining "economic isolation like the world has never seen before" with the continued blockade keeping anything from entering or leaving Iranian ports. The campaign, dubbed "Economic Fury," has run since April.

The announcement came a day after the United Arab Emirates cut off trade with Iran following Tehran's firing of two missiles at the Gulf nation, and as Trump separately threatened to "bomb the s— out of" Oman if Muscat interferes with negotiations. CNN reported Trump has ordered senior envoys to pause talks with Iran, frustrated that Tehran has not yielded to his demands.

Covert corridor restores half of pre-war flows

The US military has quietly run a shipping corridor through the strait for weeks, moving about 10 million barrels a day out of the Gulf via a southern channel off Oman, according to Axios. Each night, 15 to 20 tankers transit in coordinated inbound and outbound convoys guided by US military direction, with a task force based at Fort Bragg in North Carolina coordinating schedules.

A two-week US Central Command campaign degraded Iran's radar and maritime surveillance capability, leaving Tehran with limited ability to track shipping. US Air Force jets intercepted attacks on tankers, shooting down eight drones and two cruise missiles in a single recent incident. More than 80 percent of liquid cargo shipments through the strait in the past two weeks used the Oman route, a UN-approved passage Tehran opposes, CNN analysis shows.

Iranian parliament official Rezaei warned Tehran would respond to any harm to its interests through tariffs or asset seizures in the strait against hostile nations. Iran's Supreme National Security Council head Mohammad Bagher Zolghadr has said Tehran will reopen the waterway only after US troop withdrawal, an end to hostilities, lifting of the blockade, war compensation and unfreezing of Iranian assets.

Oil prices and the inflation risk

The last time the strait closed for an extended period, in 2019 after attacks on tankers, Brent spiked above $75 within weeks before retreating as supply fears eased. This closure has proven more persistent, with prices holding above $90 for weeks as the US and Iran trade strikes and the waterway's reopening remains tied to conditions neither side appears willing to meet.

For consumers, the supply squeeze compounds inflationary pressure already building from refinery constraints. US diesel prices have reached record highs even as domestic crude production hits new peaks, according to El Economista, as the combination of Russian and Iranian supply disruptions tightens refined product markets. Trump has said oil prices will fall significantly once the Iran crisis ends, though no timeline has been offered.

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