The Strait of Hormuz's future is unsettled in wake of latest strikes

Oil producers and markets were hoping to continue the rise in passages that followed a U.S.-Iranian interim deal, from less than 10% of normal to roughly half of prewar averages on the eve of the June 25 drone incident.

A second strike on Saturday hit a tanker carrying crude for the state-run energy company of Qatar, a key negotiator between Iran and the U.S. The U.S. responded with a second round of strikes on Iranian “surveillance infrastructure, communication systems, air defense sites, drone storage facilities and minelayer capabilities.” Iran launched drone and missile strikes on Kuwait and Bahrain on Sunday.

Here’s where things stand and the reasons behind the current confusion.

Iran tries to assert its control over the strait

Iran demands that ships pass the strait using a route near its coastline. It has set up an agency to vet ships and collect information on crews, destination and cargo. It had also demanded payment in at least some cases. That meant a conundrum for ship owners and operators, because the Islamic Revolutionary Guard Corps, which is running the vetting process, is considered a terrorist organization by the U.S. and the EU. So paying the IGRC means exposure to risk of U.S. or EU sanctions.

Ships had increasingly used a southern route along the coast of Oman under a U.S. overwatch operation that guided them using drones and aircraft. The ship that was hit was trying to use that route.

Control over the strait gives Iran leverage over the global economy, and over Trump. The effective closure of the strait sent U.S. gasoline prices higher, a politically sensitive issue ahead of the U.S. mid-term elections in November. Simple fear of Iranian drones or speedboats, it has turned out, is enough to deter ship traffic.

The US and Iran don’t agree on what they agreed on

U.S. officials say the interim agreement was that the strait would reopen, without Iran collecting money from passing vessels, for 60 days while a more permanent resolution to the war is negotiated.

Iran is citing language from the agreement which says that Iran “will make arrangements using its best efforts for the safe passage of commercial vessels” during the negotiating period.

Iran says that language means it’s up to Iran exactly how the strait reopens. The interim agreement says Iran will “conduct dialog with the Sultanate of Oman to define the future administration and maritime services in the strait.”

Iran underlined that position by initially threatening vessels without taking action. At that point, enterprising ship operators started to test the Iranian position and took their chance to rescue vessels stuck for weeks in the Gulf. The day before the June 25 drone strike, 78 vessels passed the strait, including at least five large oil tankers with up to 2 million barrels of oil each, according to S&P Global. That was still below the 130 or more that was normal before the war. But oil prices fell to prewar levels, and a return to normalcy seemed to at least be on the horizon.

Ship traffic continues at somewhat lower pace

Ship traffic has continued, but at a somewhat lower pace than the day before the first Iranian strike, and an humanitarian evacuation by the UN's International Maritime Organization remains suspended.

On Sunday, there were 44 transits, 24 inbound and 20 outbound, with the “strait open with no disruption to freedom of navigation despite ongoing military operations,” according to marine data firm Windward. It said “most traffic has shifted north under Iranian coordination" and noted that “multiple” sanctioned tankers had crossed Sunday.

There was “elevated activity” by IGRC speedboats, with around 60 of the vessels patrolling in swarms around the U.S.-overseen southern corridor.

Of 108 crossings over the weekend, 39 used the U.S.-backed Omani route, 37 the Iranian route, while 23 were unknown due to their switching off their location systems and running dark, according to ship tracker MarineTraffic.com. Nine used a prewar route in the middle of the strait.

“The split suggests operators are still assessing risk cautiously, rather than returning to pre-crisis traffic patterns,” MarineTraffic.com said on X.

The oil market remains unruffled, US gasoline prices down

Oil prices fell after the U.S.-Iran memorandum raised hopes of an end to the conflict, and oil traders seem to have stayed with that approach.

International benchmark Brent crude rose 0.9% on Friday to $72.67 at 1430 GMT, close to its last close before the war of $72.48.

Other factors have combined to ease pressure on oil prices, the International Energy Agency said in its monthly report Monday. Hit with higher fuel prices, consumers have scaled back energy use. IEA member governments released oil from emergency stocks. Exporters like Saudi Arabia and the United Arab Emirates have ramped up alternative routes using pipelines that bypass the strait. Exports surged from other suppliers, most notably the US. Another major factor: the 40% drop in China’s oil imports between February and May, as China relied in part on drawing down its robust oil reserves.

U.S. gasoline pump prices have fallen back below $4 per gallon, averaging $3.86 as of Monday.

Experts say Iran’s position is contrary to international law

Multiple international law experts say Teheran’s demand to control the strait violates international law as set down in the United Nations Convention on the Law of the Sea, which took effect in 1994.

The treaty requires coastal states to permit peaceful passage through their waters. Iran’s stance raises concerns that other choke points, such as the Straits of Malacca in East Asia, could be subject to geopolitical power plays that disrupt global commerce, as Iran’s blocking of the Strait of Hormuz has done.

Trump says talks are coming, Iran hasn’t confirmed

The U.S. and Iran are supposed to negotiate a more lasting resolution, including the strait and the future of Iran’s nuclear program and stockpile of highly enriched uranium, and ending the fighting in Lebanon between Israel and the Iranian-backed Hezbollah militant group.

Under the interim deal, the two sides have 60 days to work out the details.

Trump said Monday on social media that Iran had requested a meeting with U.S. counterparts. However one of Iran’s top negotiators said no further talks had been scheduled.