Trump backs off Hormuz escort operation after flurry of Iranian attacks
(Originally published May 6 in “What in the World“) The Strait of Hormuz has relapsed into war.
Trump said he was pausing the U.S. Navy’s effort to escort ships, “Project Freedom,” through the Strait of Hormuz after it sparked a flurry of Iranian attacks. Trump said the pause was to pursue “promising” negotiations, but it came just one day into the operation, during which the Navy shot down Iranian drones and cruise missiles aimed at Navy ships and U.S. Apache helicopters sank six speedboats from Iran’s “mosquito” fleet. The UAE said Iran fired at it with drones and missiles, starting a fire at the country’s largest oil storage area. Oman also reported an attack near a town on the Strait.
News of the attacks sent the benchmark oil price up Monday by roughly 6%. Global oil reserves fell in April at a record pace of 6.6 million barrels, or 0.165%, a day, as roughly 1,600 oil tankers and other ships remain stuck in the Gulf. That drew global reserves down by roughly 5%. “This is massive, it is far above the usual range,” S&P’s head of crude research Jim Burkhard told the Financial Times. “An inevitable market reckoning is coming,” adding that “higher crude oil prices are still to come.”
After successfully escorting one U.S.-flagged tanker through the Strait on Monday, Trump and the Navy may have also found no one else willing to be escorted. Experts said shipping companies weren’t likely to jump at the opportunity to be used by the U.S. Navy as bait for Iranian attacks, and so it was the U.S. that was likely to bear the biggest potential losses until it could demonstrate that it has neutralized the threat. One way to do that? Let Iran have the Strait.
While investors still seem to believe Trump when he says talks are promising, he may simply be playing for time. There are now four U.S. Navy carrier groups in the Middle East and a fifth, the amphibious assault ship USS Boxer with its Marine expeditionary force, is in the Bay of Bengal en route to the fray.