Crude oil futures eased from session highs in midday trading on Tuesday after President Trump backed away from his proposal to impose a 20% security fee on cargo transiting the Strait of Hormuz, as Iranian armed forces launched attacks on more vessels in the key energy chokepoint.
Front-month West Texas Intermediate crude futures eased by 0.7% to $78.64 per barrel, while Brent futures rose 1.1% to $84.21/bbl.
Trump, in a social media post on Tuesday, said he would replace the 20% protection fee for cargo transiting the Strait of Hormuz, which he had floated a day earlier, with trade and investment deals from Gulf countries.
"Based on highly productive conversations with Middle East leadership, I have decided to replace the 20% United States Reimbursement Fee with Trade and Investment Deals that the various Gulf States will be making into the United States," Trump said in a Truth Social post.
Trump's reversal contradicts his administration's past opposition to tolls in the Strait. Previously, Iran had demanded tolls for safe passage but agreed not to impose the fee for 60 days under the interim peace deal it signed with the US.
On Monday, Iranian Foreign Minister Seyed Abbas Araghchi said that while Trump was correct in principle that countries responsible for ensuring the safe passage of commercial vessels should receive compensation, Tehran remains the historic guardian of the strategic waterway.
Meanwhile, Iran fired missiles at Jordan, Bahrain and Kuwait on Tuesday after the US launched an attack on Tehran on Monday at President Trump's direction, stepping up a battle for control of the Strait.
The security situation in the key has deteriorated over the past week as Iran has attacked commercial ships.
Jeff LeBlanc, an analyst at TPH Energy, said that tensions have continued to escalate over the past 48 hours, with the US and Iran continuing to launch sweeping retaliatory strikes on each other.
Earlier on Tuesday, the UAE said two of its tankers were struck while transiting the waterway's southern shipping lane. Adnoc L&S, the shipping arm of Adnoc Group, said the two oil tankers that came under attack, the Al Bahyah and Mombasa B, suffered significant damage.
LeBlanc said Hormuz traffic was already suppressed on Sunday, and deadly Iranian strikes on two UAE oil tankers will likely bring traffic to an effective standstill, resetting the stalemate.
Meanwhile, Yemen's Houthi rebels fired missiles at Saudi Arabia, alleging that the Gulf state had bombed an airport under the group's control on Monday.
A wider conflict with the Houthis, who have in the past targeted Red Sea shipping, could jeopardize Saudi Arabia's oil exports through its East-West Pipeline, which allows crude to bypass Hormuz.
Kpler strategists said the Middle East's energy risk map is widening as Houthi attacks targeting Saudi Arabia push the region's security concerns beyond the Strait and toward the Red Sea, another critical maritime artery.
Saudi Arabia invested for years in the East West Pipeline and Yanbu to preserve exports if the Strait of Hormuz became disrupted, Michelle Brouhard, head of policy and geopolitical risk, said, noting that if the tensions in the Bab el-Mandeb Strait also escalate, policymakers will be managing risks across two critical maritime chokepoints.