Donald Trump threatens new Iran sanctions, heightens oil market risks

President Donald Trump called on Congress to add tariffs targeting Iran into the Lindsey O. Graham Sanctioning Russia Act on July 29, bundling two of Washington’s most contentious foreign policy fronts into a single legislative package. The Russia sanctions bill had already sailed through the Senate with an 86-12 vote, making it an attractive vehicle for Iran-related measures that might otherwise face a slower path on their own.

The move comes against the backdrop of what has become the most serious confrontation in the Strait of Hormuz in years, with renewed Iranian attacks on commercial vessels prompting the US to reinstate naval blockades and revoke earlier waivers on Iranian oil exports. Oil prices, which spiked sharply earlier in 2026, have since settled into the $80 to $85 per barrel range for both WTI and Brent.

A diplomatic deal that didn’t stick

On June 17, the US and Iran signed a memorandum of understanding that was supposed to guarantee safe commercial passage through the Strait of Hormuz for 60 days. Iran violated those terms. The details of the breach prompted Washington to snap back sanctions in early July, reinstating the very restrictions that had been relaxed as part of the diplomatic arrangement. Naval blockades followed, effectively putting the US military back in enforcement mode across one of the most strategically sensitive waterways on the planet.

Roughly 20% of the world’s oil supply passes through the Strait of Hormuz on any given day. The revocation of sanctions waivers alone triggered short-term oil price increases of more than 5%.

Where oil prices stand now

WTI crude is trading around $80 per barrel as of early August 2026. Prices hit between $110 and $126 per barrel during the worst of the Strait of Hormuz disruptions. The pullback to $80 represents a significant correction, but one that could reverse quickly if the geopolitical situation deteriorates further.

Trump’s push to layer additional tariffs on Iranian oil through the Russia sanctions bill adds another variable to an already volatile equation. If enacted, the tariffs would further restrict Iranian crude from reaching global markets, tightening supply at a time when OPEC+ production decisions are already being closely scrutinized by energy analysts.

The strategic calculation

From a foreign policy perspective, the approach signals that the administration views economic pressure on Iran and Russia as complementary rather than competing priorities. Both countries are major oil producers, and sanctions on either one affect the same global supply pool.

For Iran specifically, the combination of naval blockades, revoked waivers, and potential new tariffs represents a significant escalation from where things stood just two months ago, when the June MOU seemed to offer a diplomatic off-ramp.

What to watch from here

If the Iran tariff provisions make it into the final version of the Russia sanctions bill, expect another supply squeeze to get priced in. The more than 5% spike that followed the waiver revocations offers a rough template for how markets might react, though the magnitude would depend on the tariff levels and enforcement mechanisms in the final legislation.

Tehran’s willingness to attack commercial vessels even after signing a safe-passage agreement suggests a tolerance for escalation that markets haven’t fully accounted for. The legislative timeline for the combined sanctions bill will be one concrete variable to track, since unlike Iranian military decisions, congressional vote schedules are at least roughly knowable in advance.

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