DUBAI — For American motorists, the US-Iran ceasefire delivered something straightforward: cheaper fuel for the first time in months, as Brent crude posted its worst quarterly decline since 2008, shedding roughly $45 to settle around $72 a barrel. The less obvious consequence, and the one that trade economists are watching far more carefully, is what that cheaper oil hands Donald Trump next.
For two years, a consumer inflation rate that peaked above five percent kept the White House’s trade ambitions pinned. Tariffs on imported goods tend to push retail prices higher, and the political cost of adding to household budget pressure had outweighed the leverage that duties provide. The arithmetic has now changed. With Brent near $72 a barrel and US inflation at 4.2 percent in May, still elevated but trending lower, the Trump administration has recovered the fiscal operating room it lost.
“If crude stays cheap, inflation eases and US President Donald Trump gains room to slap fresh levies on America’s trading partners,” Simon J. Evenett, professor of geopolitics and strategy at IMD Business School and co-chairman of the World Economic Forum Trade and Investment Council, told The National. The Hormuz reopening, he added, signals not the end of oil market turbulence but the start of a different economic calculation.
The mechanism is already in motion. In February, the US Supreme Court blocked Trump’s emergency tariff powers, the authority he had relied on to impose broad import duties rapidly in his first months back in office. Forced to work within older trade law, the administration launched forced labor investigations against dozens of trading partners. That route carries its own tariff-setting power but requires documentation and a defined legal process. Trump has proposed minimum duties of at least 10 percent on imports from 60 countries targeted by those investigations, according to The National’s reporting.
The timing reflects a supply chain landscape still absorbing the blockade’s shock. During the Strait of Hormuz closure that stretched from late February through June, more than 1,200 cargo ships carrying an estimated $125 billion in goods sat stranded outside the strait. Companies across sectors responded by accelerating inventory builds, a precautionary cushion against the next disruption. That stockpiling has temporarily absorbed some of the demand pressure that tariffs would otherwise amplify. The cushion buys time; it does not eliminate the exposure.
Evenett’s read on the administration’s trade playbook is that sweeping tariff announcements function primarily as negotiating instruments rather than revenue strategies. The administration will “announce sweeping tariffs to maximise leverage, then scale them back if trading partners offer enough concessions.” But the boundaries of that strategy, Evenett argued, are defined less by diplomatic conditions than by consumer economics. “Household budget pressures will define the limits of Trump’s trade agenda,” he said, “far more than diplomacy.”
The Federal Reserve’s position complicates the picture. Kevin Warsh, confirmed as Federal Reserve chairman this year, has signaled he sees more cause for rate increases than cuts, a posture that narrows the monetary policy buffer even as the oil windfall creates fiscal room for tariffs to land. A tightening interest rate environment at the same time as new duties arrive would compress corporate margins on both the input cost and the financing side simultaneously.
The ceasefire, however, is not a deal. The Strait of Hormuz reopened under a 60-day toll-free window expiring in mid-August, but the broader nuclear and sanctions framework between Washington and Tehran remains unresolved. Iran-US talks in Doha continued through late June, with US envoys Jared Kushner and Steve Witkoff returning for a further round of negotiations, and no formal agreement at the time of publication.
If Doha delivers a durable deal, the oil market’s longer-run outlook shifts again. “If the ceasefire evolves into a lasting peace deal, a wave of returning supply could leave the oil market awash with crude next year,” Evenett told The National. Iran’s potential export capacity, if sanctions are fully lifted, runs at roughly 3.5 million barrels per day. The International Energy Agency has revised its supply projections upward to account for that scenario, though the timeline and completeness of any agreement remain open.
That longer-term oil trajectory is what trading partners in the 60 targeted countries are watching most closely. If Brent stays near or below $70, Trump’s tariff window stays open. If Doha talks collapse and crude returns above $90, the political math reverses, and large-scale duties become harder to sustain without triggering the domestic inflation backlash the administration has spent two years trying to avoid.
The sequencing of the forced labor tariff schedules has not been publicly disclosed. Which countries face the steepest initial duties, in what order, and on what timeline remains unclear. Arab News reported that oil markets were already navigating sharp uncertainty as Iranian nuclear talks continued, underscoring how closely the trade and energy agendas have become entangled. The administration has given trading partners little clarity, a deliberate ambiguity that mirrors the strategy Trump used in his 2018 campaigns against the European Union and China, when weeks of maximum uncertainty produced concessions before formal tariff orders took effect.
General Motors and Ford both disclosed tariff exposure as material financial risks in their 2018 earnings guidance. The supply chain disruptions that followed were real, if shorter-lived than feared. What is different now is that the Hormuz blockade already demonstrated, in a compressed window, how fragile just-in-time logistics had become. The inventory cushion built during that closure buys time. It does not eliminate the exposure that 60 countries, and the multinationals that source from them, now face.
