Trump announces full blockade on Iranian shipping, drops 20% Hormuz toll plan

US President Donald Trump on Tuesday announced a full blockade on ships linked to Iran while abandoning his proposal to impose a 20% reimbursement fee on cargo transiting the Strait of Hormuz. Instead, he said Gulf nations would deepen trade and investment ties with the United States, replacing the controversial toll proposal.

The announcement came just a day after Trump unveiled the 20% fee, which he had described as compensation for the US military's role in securing one of the world's most important oil shipping routes.

In a post on Truth Social ahead of a meeting with Iraq's Prime Minister at the White House, Trump said the Strait of Hormuz would remain open to all international shipping except vessels connected to Iran.

"We will therefore have a FULL Blockade, but only on ships coming to and from Iranian ports, or carrying anything to do with Iranian cargo," Trump wrote.

He credited the US military for keeping the strategic waterway open, praising Defense Secretary Pete Hegseth, Chairman of the Joint Chiefs of Staff Gen. Dan Caine and US Central Command chief Adm. Brad Cooper for their leadership.

Gulf investments replace proposed toll

Trump also confirmed that he was withdrawing the proposed 20% reimbursement fee following discussions with Middle East leaders.

"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," he wrote.

The US President said the investments would be "massive" and would support new factories, plants and equipment in the United States, creating millions of high-paying jobs. However, he did not clarify whether these were fresh commitments or an expansion of investment agreements announced during his Middle East visit last year.

Reversal comes after legal concerns

The decision marks a sharp reversal from Monday, when Trump declared the United States the "guardian of the Strait of Hormuz" and proposed charging vessels for using the vital shipping lane.

The proposal had drawn legal scrutiny, with Secretary of State Marco Rubio previously stating that charging tolls on the Strait of Hormuz would violate international maritime law because it is an international waterway. Vice President JD Vance had also argued that international waterways should remain free of tolls.

Iran rejects US role

Trump's latest announcement comes amid escalating tensions between Washington and Tehran. Iran's military leadership has rejected any US role in policing the Strait of Hormuz and warned Gulf neighbours against cooperating with Washington.

Reiterating his hardline stance, Trump said Iran's leadership was leading the country toward "total destruction" and declared that "Iran will never have a nuclear weapon."

Oil markets remain on edge

Trump's initial proposal for a shipping fee, coupled with renewed US restrictions on Iranian vessels, had rattled global energy markets over concerns about potential disruptions to oil supplies through the Strait of Hormuz, which handles roughly a fifth of the world's seaborne crude oil trade.

Following Tuesday's reversal on the toll proposal, crude prices pared some of their earlier gains. West Texas Intermediate crude rose 23 cents to $78.37 a barrel, while Brent crude, the global benchmark, gained 65 cents to $83.95 a barrel, as investors continued to monitor developments in the US-Iran standoff.