Strait of Hormuz. On Saturday, Feb. 28, the USA and Israel launched a joint attack on Iran which resulted, among other things, in the death of several of Iran’s senior leadership, including the Grand Ayatollah Ali Khamenei. Apart from targeting the leadership, the attacks were also aimed at the Islamic Revolutionary Guard Corps (the Iranian paramilitary organization whose official role is to support the Islamic Republic).
Iran has long threatened, if attacked, to drag the region into total war, including targeting Israel, the Gulf Arab states and the flow of crude oil crucial for global energy markets. So, in retaliation, Iran has launched a series of attacks on gulf states, Cyprus, the US Navy carrier groups in the Gulf and the Mediterranean. The US responded to these attacks by wiping out the Iranian navy and hitting various missile sites in Iran.
Iran then declared that any oil tankers using the Strait of Hormuz would be attacked, and they launched drone attacks on several tankers, and oil / gas sites in Qatar and Saudi Arabia.
More recently Iran has placed mines in the Straits and has attacked more tankers trying to flee the fighting. America and Israel have responded by more attacks on Iranian leadership. Ships attempting to leave the Straits are claiming connections to China, Turkey or that they are Muslim flagged ships. Others have gone through the Strait of Hormuz with their transponders switched off to conceal their position, sometimes only reappearing on marine trackers once safely out of the area.
In another twist, Iran’s Islamic Revolutionary Guard Corps has announced that European and Arab nations will be granted unhindered access to the Strait of Hormuz solely on the condition that they expel diplomats representing the United States and Israel.
The importance of these attacks cannot be underestimated as 20% of the world’s oil passes the through the Straits, and Qatar is one of the largest Natural Gas suppliers in the world. Iran’s stated aim is to close the straits and force the oil price up to $200 per barrel.
Oil and Gas prices have already risen by up to 75% and are expected to rise further or at best remain high for a period of at least 4 weeks as President Trump has declared that this operation will last for a period of 4 weeks. Countries that are heavily dependent on oil imports (China, India, Japan, S Korea and USA) can expect to see some supply distortions which will impact upon growth and GDP. Natural Gas importers will also face a growth risk (the largest being China, Japan, Germany and USA)
We can therefore expect this to have a negative impact on the 2026 Forecast for at least 4 weeks, but the oil and gas prices will probably remain higher than normal for some time after this military operation concludes. The longer that this continues, the greater the impact and the longer the aftermath will continue and this may even trigger a global recession, but this remains uncertain at this time. PSR
What is the Strait of Hormuz and why is it so important?
Tariffs Continue To Cause Problems
Since the beginning of his second term Jan. 20, 2025, President Trump has increased tariffs on U.S. imports from all global partners, and to implement these tariffs, the President has cited in the International Emergency Economic Powers Act. These tariffs have been wide ranging and have been applied to over 180 countries worldwide, with rates varying based on trade agreements and specific goods.
The U.S. has imposed reciprocal tariffs on several countries, with a blanket rate of 10% for many trading partners. However, some countries like India and Brazil faced significantly higher tariffs of 50% due to specific trade issues. These tariffs include:
- Mexico: 25% tariffs.
- Canada: Tariffs were increased to approximately 35%.
- South Korea: A 15% tariff is in place, while negotiations continue.
- China: Tariffs have been reduced recently, but they remain high compared to other countries.
Many other countries then started to negotiate with USA to reduce these tariffs.
In a 6-3 decision issued Feb. 20, 2026, the Supreme Court of the US (SCOTUS) ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose tariffs.
The ruling invalidates the administration’s sweeping country-level reciprocal tariffs and fentanyl-related levies, which had collectively accounted for roughly half of all US customs duties since their introduction in early 2025.
It is estimated that cumulative IEEPA tariff collections reached approximately $165 billion by January 2026, with potential refund exposure of up to $175 billion. The ruling invalidates the administration’s sweeping country-level reciprocal tariffs and fentanyl-related levies, which had collectively accounted for roughly half of all US customs duties since their introduction in early 2025.
The Supreme Court did not address the mechanics of refunds, leaving the matter to renewed proceedings before the Court of International Trade (CIT). While nearly 2,000 companies had already filed protective actions prior to the ruling, this represents a fraction of the 300,000+ importers that had paid IEEPA duties by December 2025.
The Trump administration responded within hours. On Feb. 20, President Trump issued a proclamation imposing a 10% ‘temporary import surcharge’ on all countries under Section 122 of the Trade Act of 1974, effective Feb. 24, 2026, for 150 days. The following day, he announced via social media his intention to raise the rate to the statutory maximum of 15%
A critical constraint within Section 122 is that the tariffs expire automatically after 150 days — by 24 July 2026 — unless Congress votes to extend them. This is politically uncertain because the US midterm elections are approaching and polls are showing voter opposition to elevated import costs
Who wins and who loses.
- UK and Australia both had negotiated 10% tariffs, so a 15% tariff is a loss, but does the agreed deal still apply (no one is certain yet).
- EU, Japan, S Korea and Taiwan all had agreements with a 15% tariff, so things are neutral for these countries, but they all had agreements to invest hundreds billions of US $ in the US, and to buy goods from the US. Yet again, no one knows whether these agreements still stand, or whether they will even go ahead.
- Mexico, Brazil, Canada, China & India all had tariff rates between 18% and 50%, so they are all winners in this instance. China and India also had agreements which may or may not be valid now
However, President Trump has warned that trading partners perceived to be ‘playing games’ on previously agreed terms may face punitive responses, which has further introduced continued uncertainty.
The EU’s decision to pause ratification of its trade deal with Washington pending legal clarity bears watching as an indicator for broader multilateral confidence. India retains additional flexibility as it finalizes the terms of its framework agreement.
Finally, Trump’s planned visit to Beijing on 31 March is significant for US–China trade dynamics — even after the ruling, China retains one of the highest aggregate tariff burdens among major US trading partners, with a trade-weighted effective rate of approximately 30%.
Recently Judge Richard Eaton of the U.S. Court of International Trade has issued an immediate compliance order on the question of refunds of the tariffs and has said that the Presidents team must issue an update on the processing of refunds by March 12, and a follow up update must be issued by April 20. Judge Eaton also stated that taxpayers will feel the burden by the end of the year should the admin not fulfil its refund obligations
The changes to the tariffs are an improvement for several large economies so this should be a boost to 2026 figures. PSR
Guy Youngs is Forecast & Adoption Lead at Power Systems Research
