Hormuz Stays Shut to Shipping Despite Truce, Keeping a Risk Premium in Oil

The world's most important passage for seaborne oil shipments remains contested. Iran's state-aligned reporting, relayed by TASS, said the naval forces of the Islamic Revolutionary Guard Corps (IRGC) are issuing no transit permits "until further notice," keeping the Strait of Hormuz formally closed to shipping. That position is difficult to reconcile with the memorandum of understanding signed on June 17 that ended the US-Iran war, which mediators in Pakistan had described as committing Tehran to promptly reopen the strait and Washington to lift its blockade of Iranian ports.

Conditions on the water are more ambiguous than either side's statements. The South China Morning Post reported that three fully loaded India-linked supertankers reappeared in the Gulf of Oman, with traffic observed moving in both directions across the strait even as official accounts of whether transits are permitted continue to conflict. The negotiations now under way in Switzerland are aimed in part at keeping Hormuz open, The New York Times noted, with renewed fighting in Lebanon threatening that effort.

Roughly a fifth of the world's seaborne crude normally passes through the strait. At the peak of the closure in March, Brent crude rose to about $114 a barrel before the truce brought prices back toward pre-war levels. Israeli commentary in Globes argued that any Iranian move to impose tolls or selective passage on the strait could work against Tehran by strengthening the case for naval escorts and alternative routes.

The gap between a signed truce and an unopened waterway is the central uncertainty for energy markets this week. As long as the IRGC controls who passes, the supply risk that raised crude prices in the spring has not fully disappeared.