The question of who controls Strait of Hormuz safe passage is shaping oil markets and geopolitics in equal measure, with analysts and officials sharply divided over how much oil is actually getting through the narrow Gulf waterway. Competing claims from Iran and the United States, a pair of cautiously positive diplomatic headlines, and an escalating US economic campaign against Tehran are all pulling in different directions at once.
The Toll Plan Gulf Nations Will Not Accept
Iran and Oman have indicated they are close to establishing a joint shipping corridor through the Strait, with the two countries potentially working together to ensure safe passage for vessels and to clear mines. The announcement was enough to push oil prices down by a couple of dollars on Tuesday. But the diplomatic optimism comes with a significant caveat: neither Iran nor Oman has any legal authority over the waterway, which is an international shipping channel open to all navigation.
More practically, other Gulf nations are very unlikely to agree to any arrangement that would require them to pay a fee or toll for safe passage. As Brian Sullivan noted in an interview with Amrita Sen of Energy Aspects, representatives of several Gulf nations have made clear they would be frustrated by any pay-to-ship arrangement. Iran can threaten and disrupt shipping, but that does not translate into a legal or political basis for the two countries to broker a binding deal on the Strait.
A separate piece of positive news came from Pakistan, which said it had made ‘significant progress’ in peace talks with Iran. Pakistan has been playing a back-channel role in reaching Tehran, and its upbeat assessment provided some further relief to oil markets.
America’s Economic Squeeze on Iran
Behind the diplomatic manoeuvring sits a hardening US economic campaign. Labelled ‘Operation Economic Outcast’, the effort led by US Treasury Secretary Scott Bessent aims to pressure Iran’s leadership back to the negotiating table and to reduce aggression around the Strait. The precise details of new sanctions and economic measures were still being finalised at the time of writing.
According to The New York Times, the Treasury Department is imposing sanctions targeting Iran’s digital assets, gold and aviation sectors, areas Iran uses to help finance its economy. The move adds fresh pressure on top of existing restrictions and forms part of the broader ‘Operation Economic Outcast’ push.
There is also a quieter development running alongside the Iran measures. The Office of Foreign Assets Control has ended its designation of Syria as a state sponsor of terrorism. That change matters to companies including Chevron, BP and ConocoPhillips. While it does not guarantee that investment plans will go ahead, removing the terrorism label lowers a substantial barrier for Western energy firms looking to invest in the country.
The timing connects to a separate announcement that several major firms plan to invest more than $60 billion into Iraq, with some of those funds earmarked for pipeline construction running from northern Iraq through Syria and Turkey, where oil would then be loaded onto ships and transported via the Mediterranean. By removing Syria’s terrorism designation, American companies face a considerably lower hurdle to participating in that infrastructure.
How Much Oil Is Actually Getting Through?
The fundamental uncertainty over Strait of Hormuz safe passage is reflected in the wildly different data sets circulating in the market. Before hostilities escalated, fully 20% of all the world’s oil flowed through the narrow Gulf corridor. That figure is now well below pre-war levels, though the exact volume remains contested.
Iran claims very little oil is getting through. The US government says a fairly significant amount is making it out, in large part because of US Navy escorts. Kpler, the parent company of Marine Traffic, had flagged rising risks in the region before the latest round of positive diplomatic headlines emerged.
On Wall Street, Citigroup’s base case remains an Iran peace deal that could send Brent crude back to the $60 range next year. The firm also outlines a bull case in which the Strait remains unsteady past the November 3rd elections and Brent rebounds to the $110 range. The spread between those two scenarios captures just how much uncertainty still surrounds the question of who, in practice, controls the waterway and on what terms.
