Strait of Hormuz Shipping Stalled Despite
Cease-Fire Uncertainty
Vessels are wary of passing the coast of
Iran in the strait, given the fragile agreement, and the number of ships traveling
through it has even dropped.
1.
Hundreds of oil tankers are waiting to return to
the Strait of Hormuz, a key route for about 20% of global oil and gas trade.
2.
A fragile cease-fire between the U.S. and Iran
has not restored normal shipping activity.
3.
Iran had restricted the strait during the conflict
by laying mines and attacking vessels.
4.
Iran has now promised “safe passage”, but
with conditions:
o
Ships must coordinate with Iranian forces
o
Movement is subject to technical restrictions
5.
Shipping activity remains very low, with only a
few vessels passing daily, far below normal levels.
6.
The uncertainty of the cease-fire is the
main reason companies are hesitant to resume operations.
7.
For normal shipping to resume:
o
Confidence in the cease-fire must improve
o
Iran must clearly declare the strait fully open
and safe
8.
Iran is attempting to control and monitor vessel
movement, including:
o
Requiring coordination
o
Possibly enforcing specific routes
o
Reports of some ships paying “tolls”
9.
Several governments (India, Pakistan, Thailand,
European nations) are working to ensure safe navigation in the region.
10.
President Donald Trump suggested the U.S. could jointly
manage shipping in the strait with Iran.
11.
Analysts doubt Iran can manage full traffic
capacity (100+ ships/day) if it continues strict control.
12.
Shipping companies face a dilemma:
13.
War-risk insurance costs surged, and
uncertainty continues to discourage insurers and shipowners.
14.
Regional tensions remain high, as Gulf countries oppose
Iran controlling such a critical chokepoint.
Core
Insight
👉 The Strait remains a global
energy chokepoint, but security risks, political control, and legal
uncertainties are preventing a return to normal shipping.
Hundreds
of tankers are waiting to return to the Strait of Hormuz so that the waterway can
once again become a conduit for a fifth of the world’s oil and gas.
But
the shaky cease-fire struck between the United States and Iran has not coaxed the
tankers back — and even if it holds, other obstacles have to be overcome for shipping
traffic to return to normal.
Iran
has kept a stranglehold on the strait throughout the war by laying mines and attacking
vessels. As part of the cease-fire, Iran’s foreign minister said, the country will
allow “safe passage” for ships through the strait, but he added that the vessels
would have to coordinate with Iran’s armed forces and that passages would be subject
to “technical limitations.”
What is the situation in the
strait now?
Only
four vessels traveled through the strait on Wednesday,
according to S&P Global Market Intelligence, down from an average of nine a
day over the previous five days. And shipping analysts said there were no signs
of large-scale positioning or queuing to go through the strait.
The
fragility of the cease-fire — Iran said on Wednesday that Israel’s attacks on targets
in Lebanon had violated the agreement — was the main reason ships were holding back,
shipping industry participants said.
“It’s
too unstable for anyone to commit,” said Oscar Seikaly, chief executive of NSI Insurance
Group, a maritime insurance brokerage.
What has to happen first for
ships to go back?
First,
shipping analysts say, there has to be confidence that the cease-fire will hold.
And then there has to be a declaration from Iran that it will not attack vessels.
“Iran
must clarify that the strait is open for safe passage. Otherwise, vessels should
not be expected to sail through the way they were doing prior to the war,” said
Noam Raydan, a senior fellow at the Washington Institute for Near East Policy.
But
Iran is also demanding that it oversee and coordinate passages through the strait.
The government hasn’t clearly stated what vessel operators must do to gain permission
to pass through. Some shipowners have made “toll” payments to Iran. And, according
to Kpler, a shipping tracking firm, most of the crossings during the war have taken
a route that goes close to Iran’s coast. This suggests that Iran requires taking
this route.
Iran’s
official broadcaster said on Wednesday that, because of anti-ship mines in the traffic
zones, vessels must coordinate with the Iranian Navy and use designated routes to
cross the waterway.
Do governments have to get
involved?
The
governments of India, Pakistan and Thailand have worked with Iran to ensure safe
passage of vessels.
In
a joint statement on Wednesday, the leaders of seven European nations, Canada, the
European Commission and the European Council said their governments “will contribute
to ensuring freedom of navigation” in the strait.
President
Trump suggested on Wednesday that the United States might jointly control the strait
with Iran.
“The
United States of America will be helping with the traffic buildup in the Strait
of Hormuz,” Mr. Trump said in a social media post. “There will be lots of positive
action! Big money will be made.”
ABC
News reported on Wednesday that Mr. Trump had told one of its reporters that the
United States could operate shipping in the strait “as a joint venture” with Iran.
Will shipping return if Iran
doesn’t give up full control?
Analysts
say Iran can continue to act as a gatekeeper if the number of vessels going through
the strait remains relatively small. But it would not be able to manage the more
than 100 ships a day that passed through the strait before the war.
“Blanket
passage arrangements are unlikely to be implementable by Iran, due to capacity constraints
around vessel identification and ongoing requirements to guide vessels through the
corridor,” Jack Kennedy, head of Middle East and North Africa country risk at S&P
Global Market Intelligence, said in an email.
Also,
the threat of war will linger if Iran keeps throttling the strait. The Persian Gulf
states do not want Iran to have such power over the waterway. Oman, the country
on the other side of the strait, could invite ships to pass close to its coastline,
but such a move might prompt Iran to attack the vessels.
Will shipping companies pay
a toll to Iran?
Given
that more than 100 large commercial ships have gone through the strait since the
war began, some vessel operators are willing to negotiate with Iran and even pay
millions of dollars for a passage. Shipping companies are losing money on vessels
that are waiting to go through the strait, so they may be willing to pay large sums
to get their ships out into the Indian Ocean and operating normally.
Still,
the larger, more established shipping companies may decide that doing business with
Iran is too much of a legal risk, particularly if the United States continues to
impose sanctions on Iran.
“The
issue of sanctions on Iran makes it a very complicated process, since it involves
financial transactions with a sanctioned regime,” Ms. Raydan said.
How hard is it to get insurance?
When
the fighting began, the cost of “war risk” insurance for ships and cargo going through
the strait skyrocketed. A few shipping companies bought it, and it has been available
at times during the war, Mr. Seikaly, the insurance executive, said. But the fragility
of the cease-fire has driven down demand for insurance.
“It
is not the right moment, and everyone knows that,” he said.