Strait of Hormuz Remains Constrained Amid Iran-Oman Deal Rumors

By Lori Ann LaRocco – Almost six months into the U.S./ Israel war with Iran, the state of the Strait of Hormuz is still constrained. Ambrey has alerted another tanker aborted its transit through the Strait of Hormuz after two explosions were reported 37 NM southwest of Bandar-e-Jask, Iran.

This attempted attack comes at the same time Iran announced "a deal" to "reopen" the strait has been agreed to with Oman.

Any type of deal involving a toll would require more than the U.S. approving. The International Maritime Organization members would need to vote on the proposal. In an email, an IMO spokesperson told me, "The IMO has no comment" on the latest rumor of a deal between Iran and Oman.

Tolling a natural body of water flies against the international treaty, "Law of the Sea," by the United Nations Convention on the Law of the Sea (UNCLOS). The IMO oversees this treaty, and all members will need to vote on this proposal if the U.S. agrees to it. It's highly doubtful the U.S. would agree to such a proposal.

But despite the opposition, Iran has already imposed an illegal toll system on the Northern passage of the Strait. Some owners and operators have defied the U.S. and paid.

Bridget Diakun, Maritime Intelligence & Research Director for Lloyd's List Intelligence, said during the weekly update on the Middle East and Russian waterways that, while there is no true visibility on who is paying Iran for transits through the Northern route of the strait, you can track the flags of vessels transiting.

"Anyone wanting to know who's chatting with Iran in order to go through and who's not, is to look at the route (their vessels) that they take," explained Diakun. "So, all those ships that are sailing along the Iranian-like prescribed route, they have had to have some level of conversation, be it through diplomatic channels or through that toll system."

Windward data shows the flags of vessels traversing that route are Iran, China, Panama (consistently one of the dominant flag registries active in the wider Gulf and transit lanes), India, Marshall Islands, Vietnam, Hong Kong, Comoros, and Aruba.

This latest announcement by Iran on a deal is not new. Iran has floated the toll before, and President Trump has shot it down.

Since this latest announcement, the IRGC and its proxies have attacked numerous ships over the last several days in the Strait and Red Sea.

Since Sunday, several vessels have been attacked by the IRGC, according to the UK Maritime Trade Operations and Ambrey.

Two tankers have also been targeted in the Red Sea by Iran-proxy Houthis.

Lloyd's List data shows there has been a 24% drop in traffic by non-sanctioned, non-shadow fleet tankersweek on week in the Red Sea. Preliminary transit data shows 91 vessels transited the week before July 20th; it then dropped down to 53 the following week.

Data is still in the "normal range" and is considered currently "stable".

"The impact is certainly there," said Diakun. "But this is not a disruption across all the sectors and markets. Containerships are behaving normally. Bulk carriers have dropped, but that's quite typical for the bulk carrier market. It does fluctuate a lot week on week, so I wouldn't necessarily link it to this situation quite yet. Suez Canal traffic is completely unchanged in total volumes going through. The minor shift that we've seen right now is in tanker transits."

However, the Strait of Hormuz has been constrained for such a long time that the bar now is so low that the increase in transits from a percent perspective is misleading.

Last week there was an 87% increase in total transit through the Strait of Hormuz according to Lloyd's List data. Outbound voyages were up 63% and inbound up 122%. But the devil is in the details. Transit went from 45 to 84. Iranian-linked vessels led in transits.

Focusing on non-Iranian link traffic, transits went from 28 to 52. 60% of those ships were exiting, while 40% were heading inbound into the Gulf. 25% of this non-Iranian link traffic has been confirmed moving through the Omani system

"Typically, in a normal week before all this happened, we'd be looking well over 700," said Diakun. "This is not a trend. This is one data point. So, it's not indicative that owners are more confident in the situation right now. It's kind of an outlier."

70 vessels that arrived in the Gulf in February are still stuck, according to Diakun. An additional 65 ships that moved in during the MOU period haven't left since the agreement collapsed last month. The owner/operators of these vessels are paying daily war insurance fees and crew salaries. The seafarers are living in life-threatening situations.

"From a major liner operator perspective, the situation remains predictably unpredictable," said Neil Dekker, Senior Analyst, of Infospectrum, part of Lloyd's List Intelligence. "There is no need to change their status quo from using their east-west services round via the Cape. Commercially, there is a good incentive for major liner operators not to go back through the Suez because obviously the longer transits mean that you have to add additional ships to each loop, which soaks up capacity. That's a positive thing for them commercially."

So, continue to expect more expensive, slower trade and supply disruptions until the Strait of Hormuz and Red Sea situations return to real normal transits.