On June 17, the United States and Iran reached an agreement to reopen the Strait of Hormuz. This crucial waterway linking the Persian Gulf and the Indian Ocean is the world's most important oil and gas transit route. Following the outbreak of war between the two nations in February, shipping through the strait was nearly halted.
Under the interim agreement, both sides granted a 60-day toll-free navigation period for commercial vessels while negotiations for a permanent end to the conflict proceed. This led to a recovery in vessel traffic through the Strait of Hormuz. In anticipation of restored Middle Eastern crude supply, international oil prices fell sharply.
However, the situation remains volatile. Iran continues to assert control over this maritime chokepoint and has threatened to permanently levy transit fees on vessels in the future. Iran also opposes the US proposal for naval escorts for merchant ships. Attacks on a container ship and a tanker on June 25 and 27, respectively, underscored that security risks in the strait persist.
Why is unrestricted passage still a distant prospect even if the Strait of Hormuz reopens? Several factors provide insight.
Risk of Attacks
US Navy escorts for merchant ships navigating routes south of the Strait of Hormuz, near Omani waters, have encouraged more shipowners to resume voyages. This has allowed millions of barrels of crude oil previously stranded in the Persian Gulf to be transported to the Gulf of Oman. An alternative route approved by Iran also handles significant oil and gas shipments, particularly for Iran's own exports.
The Iranian military has labeled the Omani route as "unacceptable and extremely dangerous," with vessels and crews still facing risks of violent attacks. While the two attacks in late June caused no casualties, they resulted in damage to the ships. Subsequently, the Joint Maritime Information Centre (JMIC), which coordinates communication between national navies and merchant vessels, raised the regional threat level back to "elevated," having only recently downgraded it to "medium."
For merchant ship crews, working in a conflict zone is inherently unsettling. Data from the UN's International Maritime Organization shows that, as of June 30, the Iran war has resulted in at least 14 crew fatalities and 49 attacks causing damage to vessels.
Consequently, the shipping industry hopes to see a full resumption of traffic only after confirming that hostilities have completely ceased.
Mine Threat
It is widely believed that Iran has laid mines in the previously busiest shipping lanes of the Strait of Hormuz, forcing vessels to use routes closer to the Iranian or Omani coasts. However, the capacity of these alternative channels has not been fully tested.
Clearing mines from the main shipping lanes would aid in normalizing traffic. The 14-point agreement between the US and Iran also mentions Iran's obligation to clear relevant mines.
The International Maritime Organization estimates there are about 80 mines in the Strait of Hormuz's shipping lanes. Mine clearance could take weeks, and disputes remain over who should be responsible for the operation.
Unclear Authority
Before the war, freedom of navigation through the Strait of Hormuz, like other key international straits, was largely taken for granted, with very few exceptions. Now, Iran views the threat to strait traffic as a significant bargaining chip in external dealings and has established a new "Persian Gulf Strait Authority," declaring that all vessels will henceforth require its permission for passage.
Several shipowners have stated they do not wish to be compelled to communicate with any party, particularly the Iranian government, in waters where the principle of freedom of navigation should apply.
Future management arrangements are still subject to negotiation. According to the 14-point agreement, Iran and Oman will discuss the future management and maritime services for the Strait of Hormuz with other Persian Gulf states. On June 30, Iranian Deputy Foreign Minister Kazem Gharibabadi stated that Iran hopes to establish a bilateral mechanism with Oman for managing vessel traffic and will proceed with its own plans if necessary.
The Baltic and International Maritime Council, the largest international shipping association, emphasizes the urgent need to clarify which entity will coordinate vessel passage in the future. It has suggested that a UN body or a neutral country could assume this responsibility.
Transit Fees
The US-Iran framework agreement stipulates that the toll-free period will end after 60 days. It remains uncertain whether free passage will continue thereafter, and it is unclear if vessels will need to pay transit fees for the Strait of Hormuz in the future.
Iranian officials state that levying fees could generate billions of dollars in annual revenue, aiding the reconstruction of an economy severely damaged by the war. While US Secretary of State Rubio has stated that the US goal remains the full restoration of freedom of navigation, at least one senior US official has acknowledged that the future management model for the strait will likely differ significantly from the pre-war status.
This issue is particularly thorny for shipowners. The US has previously indicated that paying fees to the Iranian government could violate sanctions. Shipowners fear that making such payments could lead to being blacklisted by the US.
Major energy companies are also expected to oppose any fee arrangement. In a May interview, Chevron CEO Mike Wirth stated the company would not consider paying for passage through the strait.
Stalled Oil and Gas Production
The halt in oil and gas production during the war is another major factor hindering the normalization of the Strait of Hormuz. Before the conflict, the strait handled about one-fifth of global oil and gas shipments. The war forced more crude to be rerouted, somewhat diminishing the strait's importance, but only to a limited extent.
Once oil wells are shut in, even voluntarily, it can reduce recovery efficiency and cause long-term operational losses. Other facilities were idled due to war damage. Market research firm Rystad Energy estimates the cost of rebuilding the region's oil and gas infrastructure at around $42 billion.
In some countries, production stopped simply because crude could not be exported after the Strait of Hormuz closed. Lacking alternative pipelines, Kuwait's crude output fell to 490,000 barrels per day in May, roughly one-fifth of pre-war levels, with a gradual recovery starting in June. Officials from the UAE and Saudi Arabia have stated that both countries have maintained sufficient wellhead pressure and expect to return to pre-war production levels within weeks.
As oil and gas facilities restart, tankers that previously served the Persian Gulf but were diverted to other routes or idled will need to be redeployed to the region. Rystad analysts estimate this process could take about two months. They project a noticeable recovery in Persian Gulf crude production from August to September, with about 85% to 90% of the lost output restored by early in the fourth quarter, and a full recovery by January 2027.
Analysts at Wood Mackenzie note that most refineries in the region maintained minimal operations, avoiding lengthy restart processes, and only a few facilities suffered significant war damage. If the Strait of Hormuz continues its gradual reopening, crude oil exports will be prioritized for recovery. Exports of refined products, including jet fuel and diesel, are expected to return to 2025 levels by the end of this year.
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