Free or fee

Daily update

US President Trump had declared the Strait of Hormuz open for free. Now Trump has declared it open for a 20% fee. Shipping data suggests there was less-than-universal belief in free safe passage through Hormuz on Monday. It is unlikely ships will go full steam ahead to take the same risks while paying a high tax. A 20% fee would be about 15 times the mooted Iranian charge, and (as a proportionate tax) would exaggerate future oil price moves.
The expectation that shipping volumes through Hormuz will now be minimal has dented the optimism bias of markets and pushed oil prices up more significantly (though still well below the crisis peaks). Monitoring the US gasoline price reaction may be useful.
Federal Reserve Chair Warsh is to testify to Congress, presumably still refusing to give guidance on policy. This is despite deep divisions between economists and bond dealers over the direction of interest rates. The Fed’s Waller indicated a desire to raise rates if core inflation rises (core inflation still has a notable oil element embedded in it). Waller also signaled that the balance sheet should not be a concern.
China’s June export data is due. Exports of the electrification “big three” are a focus.