A potential 60-day ceasefire between the US and Iran could reopen the Strait of Hormuz, a move that would lower oil prices and ease global food security fears.
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US and Iran near 60-day ceasefire to reopen key oil strait
The United States and Iran are nearing an agreement to extend their ceasefire by 60 days, a deal that includes gradually reopening the Strait of Hormuz and relaxing the US blockade on Iranian ports, according to mediators. The potential breakthrough follows weeks of shuttle diplomacy by Pakistani and Qatari envoys aimed at preventing a collapse of the monthlong truce.
"Deep and extensive differences" remain, Iran’s foreign ministry spokesman, Esmaeil Baghaei, said Friday, according to state news agency IRNA, cautioning that "diplomacy takes time." His comments were echoed by US Secretary of State Marco Rubio, who noted there had been "some progress" but that diplomats were "not there yet."
A reopening would address a significant disruption, as Lloyd’s List Intelligence data shows only 54 ships transited the strait between May 11-17, compared to a pre-war daily average of 138 vessels. The disruption has helped push the US national average gasoline price to $4.53 per gallon, up over $1.55 since the war began, according to the American Automobile Association.
The closure of the strait, which handles about 20% of the world's oil and liquefied natural gas supplies, has created a major risk premium in energy markets. UK Foreign Secretary Yvette Cooper warned the disruption puts tens of millions of people at risk of hunger, stating the world is "sleepwalking into a global food crisis" due to the chokepoint's importance for fertilizer shipments.
Iran's $1 Million Toll System Faces Legal Headwinds
The potential de-escalation comes as Iran attempts to formalize a toll system for passage through the strait, a move that has drawn sharp criticism. Tehran's ambassador to France, Mohammad Amin-Nejad, announced discussions with Oman to manage navigation and security, stating "it goes without saying that those who wish to benefit from this traffic must also pay their share."
Iran has already been charging fees of more than $1 million per vessel, with some reports citing tolls as high as $2 million, according to Insurance Journal. However, the plan to create a permanent administrative body, the Persian Gulf Strait Authority, to oversee the tolls is contested. The International Maritime Organization stated on April 9 that any such toll would "set a dangerous precedent," a position backed by major shipping nations and the US.
Oman's Position is Key
Oman, which shares control of the strait with Iran, has historically rejected the toll proposal as incompatible with international maritime law. Its participation is geographically necessary for any bilateral administrative system, and its silence following Amin-Nejad's latest comments is significant. Any perceived softening of its position could lend legitimacy to Tehran's plan.
For energy markets, a formalized toll would replace the unpredictable risk of closure with a predictable but contested fee, fundamentally altering the economics of shipping oil from the Persian Gulf. The outcome hinges on whether the international community treats the toll as a legitimate service charge or an illegal tax. That uncertainty is enough to keep the Hormuz risk premium elevated until a formal agreement on the strait's status is reached.
This article is for informational purposes only and does not constitute investment advice.
[1] Report: US and Iran close to agreeing to extend ceasefire for 60 days[2] Regional Mediators Rush to Save U.S.-Iran Cease-Fire[3] Iran and Oman reveals shocking plan for Strait of Hormuz and oil[4] U.K. Lawmaker Warns of 'Global Food Crisis,' Urges Immediate Reopening for...[5] Crude Oil Gains As US-Iran Talks Leave Strait Of Hormuz Reopening Still Unclear...
