The S&P 500 fell 0.8% and Asia opened lower after Trump proposed a 20% toll on Hormuz cargo. The UK and Switzerland also signed a services trade deal.
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Oil prices surged more than 9% on Monday, the biggest single-day gain since 2020, after President Donald Trump proposed a 20% toll on cargo passing through the Strait of Hormuz. Trump declared the U.S. the "GUARDIAN OF THE HORMUZ STRAIT" in a Truth Social post and demanded reimbursement for military costs. "The U.S.A. will be, from this point forward, known as 'THE GUARDIAN OF THE HORMUZ STRAIT,'" he wrote. He also asked for reimbursement "on all cargo shipped, for any and all costs necessary to do the job of providing safety and security to this very volatile section of the World."
Crude extended gains in Asian trading Tuesday, rising another 2%. The White House said more than 8 million barrels of oil have moved through the strait with military assistance. The assurance did little to calm energy concerns. Traders said the toll proposal, combined with the reinstated Iran blockade, signaled a prolonged disruption to one of the world's most critical chokepoints.
The S&P 500 fell 0.8% on Monday. The Nasdaq Composite dropped 1.6%. The Dow Jones Industrial Average pulled back 0.3%. Stock futures were little changed overnight as traders looked ahead to earnings reports and inflation data later in the week.
Asia markets opened lower, with investors awaiting China trade data due Tuesday. Singapore reported its economy expanded 5.7% in the second quarter, topping market expectations, driven by strong growth in the manufacturing sector.
Separately, the U.K. and Switzerland signed a landmark services free trade agreement on Monday. The British government estimates the deal will unlock £5.2 billion ($6.96 billion) a year in additional exports to Switzerland. A separate agreement will allow travelers to use e-gates at airports and scrap data roaming charges. The deal is the sixth trade pact the U.K. has struck in two years, part of the Labour government's push for closer ties with Europe after Brexit. Switzerland is not a European Union member but is deeply integrated into the European single market through bilateral treaties.
The Strait of Hormuz handles roughly 20% of global oil shipments. A 20% toll would raise the cost of crude for refiners, potentially pushing up gasoline prices. The next concrete catalyst is China trade data due Tuesday and U.S. inflation data later in the week.
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