(Not So) Fun Fact: The global average price of jet fuel has risen nearly 60 percent compared to one week ago; U.S. airline passengers should expect higher ticket prices as fuel represents 15–23 percent of operating costs.

The Strait of Hormuz Traffic Jam

What’s Happening: On Monday, President Trump told reporters that the conflict – or “excursion” as he put it – with Iran will be over soon and that the United States has “won in many ways,” although no ceasefire or timeline was announced. Meanwhile, the conflict between the United States and Iran continues to cause trade flow disruptions that impact global energy markets. Most notably, traffic through the Strait of Hormuz remains at a near standstill as shipping companies weigh the risk of being struck by Iranian missiles or drones. This remains true despite both sides offering some form of protection to shippers. The Iranian Revolutionary Guard stated that any European or Arab country that expels U.S. or Israeli ambassadors will be able to access the Strait of Hormuz free from the threat of attack. Meanwhile, the Trump Administration has offered to escort and provide insurance to tankers going through the strait in the hopes of revitalizing the flow of oil and gas.

Why It Matters: On Sunday, U.S. crude oil prices skyrocketed to nearly $120 a barrel due to Middle Eastern countries limiting production and roughly 20 percent of the global oil supply remaining bottled up in the Strait of Hormuz. The Group of Seven (G7) – a coalition of the world’s largest economies – has responded to this price shock by holding an emergency summit to discuss options, agreeing to release 400 million barrels of oil from strategic reserves. Such a historic release represents the equivalent of about 20 days of oil shipments through the Strait of Hormuz and will be coordinated by the International Energy Agency. This news, alongside President Trump’s comment that the conflict may end soon, reversed oil prices which now sit around $95. It has also been reported that some tankers continue to transit the strait by turning off their transponders to avoid being tracked. This reduced level of traffic amounts to as much as 10 percent of the regular load. While oil prices have declined from their peak, U.S. average gasoline prices remain elevated at $3.60 a gallon. This is up from around $2.95 at the start of the conflict and $3.25 at the time of the last Shipment.

As highlighted last year, the price of oil has a large impact on the global economy and a tangible impact on U.S. inflation, unemployment, and gross domestic product (GDP). It is estimated that a 20-percent price shock to crude oil could increase consumer inflation by 0.3 percent, which does not fully account for the downstream impact to the U.S. economy, as the cost of construction, shipping, and manufacturing also increase. According to Apollo Global Management, a persistent oil shock that keeps prices at $100 through 2027 would result in headline inflation rising 0.7 percentage points, unemployment rising 0.1 percentage points, and real GDP falling by 0.1 percentage points. The impacts would gradually diminish over time but not before putting significant strain on the global economy and forcing the Federal Reserve to factor higher inflation into its decision making. In a less drastic scenario where oil prices fall back to $65 by the end of June, inflation is roughly 0.5 percentage points higher in the first quarter of 2026, unemployment is slightly higher, and real GDP is close to 0.1 percentage points lower. This research rightly notes that the United States has had energy efficiency gains and is now a net oil exporter, both of which reduce the overall impact of oil shocks. With that said, if oil is no longer a countervailing force against the Trump Administration’s tariff policy that remains in effect on many products, U.S. consumers may start to feel the pain.

Looking Ahead: It has become increasingly clear that the United States and its allies will not allow a long-term closure of the Strait of Hormuz. Whether it begins to open back up because of a negotiated deal with Iran or through U.S. military safeguards remains to be seen. As it is in no one’s best interest for it to remain closed for an extended period, the Shipment expects the recent oil shock to fall toward the less drastic scenario outlined above unless there is a severe escalation.

What Else Is Happening?

New Section 301 Investigations: The United States Trade Representative announced new Section 301 investigations into “Structural Excess Capacity and Production in Manufacturing Sectors” that will likely result in a new wave of tariffs. Section 301 of the Trade Act of 1974 is a tested avenue for imposing tariffs on countries that engage in unfair trade practices that discriminate against U.S. goods or services. Examples might include promoting non-market policies, restricting U.S. market access, and stealing intellectual property. The economies currently being investigated include China, the European Union, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Taiwan, Bangladesh, Mexico, Japan, and India. Ironically, 13 of the 16 targeted countries have struck a trade deal of some kind with the United States. This is likely to indicate that this investigation is meant to shore up leverage against these countries to ensure they follow through on their commitments. The entire Section 301 process can take anywhere from 135–470 days, with a public hearing scheduled for May 5.

Remember the European Union Trade Deal: Members of the European Parliament are set to discuss the status of the U.S.-EU trade deal on March 17. If the various political groups can come to an agreement, a vote to advance the EU’s end of the deal by striking down tariffs on U.S. industrial and agricultural goods is expected on March 19. A final vote would then be held on March 26 in Brussels that could firmly establish the deal after months of delays. One remaining point of contention between the United States and EU countries is the imposition of Section 122 tariffs by the United States on European goods. These 10-percent tariffs – which may be raised an additional 5 percent – may already violate the agreement’s 15-percent tariff cap for certain products due to Section 122 tariffs stacking on top of existing tariffs.

Remember the Trump-Xi Meeting: President Trump is currently scheduled to visit China from March 31 to April 2; exact details have yet to be confirmed. It is also unclear what might be on the docket in terms of trade, investment, and geopolitical discussions. Treasury Secretary Scott Bessent and Vice Premier He Lifeng are set to meet this week, which may shed some light on the upcoming talks. Since the last meeting and subsequent trade truce between Trump and Xi in October, the president has lost the ability to impose tariffs under the International Emergency Economic Powers Act (IEEPA), which will limit his negotiating leverage. Previously, the Shipment hypothesized that the United States could drop the remaining fentanyl-related tariffs in exchange for certain Chinese concessions. But with the Supreme Court striking down those tariffs, this is no longer on the table. Instead, the Trump Administration will have to rely primarily on Section 301 investigations if it seeks to use the stick rather than any carrots to strike a deal.

Remember the Tariff Refunds: As noted, the Supreme Court struck down the use of IEEPA as a presidential tariff tool in February, opening the flood gates for U.S. businesses to pursue and receive tariff refunds. Today, the Trump Administration will update the U.S. Court of International Trade on how Customs and Border Protection (CBP) will go about issuing these refunds. CBP requested a 45-day extension to set up an automated system for refunding tariff revenue as it would take approximately 4.4 million labor hours to do so manually. For reference, the Shipment estimates that time to be worth up to $135 million. The Court of International Trade has since suspended the order to issue an immediate refund due to CBP’s concerns, meaning importers should start seeing refunds around April 20. The IEEPA refunds are set to be the largest trade-related refund in history as there are about 53 million import entries impacted by IEEPA tariffs worth close to $166 billion.

Remember De Minimis: In addition to newly imposed Section 122 tariffs, President Trump signed another executive order which maintains the suspension of de minimis which initially took effect last August. This trade rule allowed U.S. businesses and consumers to import products valued under $800 free from fees and duties (read more here). A lawsuit to bring back the little-known import pathway was filed last year but the U.S. Court of International Trade stayed the case until the Supreme Court ruled on IEEPA. Now that the IEEPA case is finalized, the defendants in the de minimis will file a response in late March while the plaintiff files a reply no later than April 9.