Strait of Hormuz reopens after US-Iran peace deal: Oil flows resume, what it means for prices | Today’s news
The tentative reopening of the Strait of Hormuz comes after an interim peace deal between the United States and Iran sparked the first major movement of oil and gas tankers through the vital waterway in months. Several supertankers carrying oil, LNG vessels from Qatar and Iranian ships have resumed transit, signaling a possible easing of one of the world’s most critical energy bottlenecks.
What changed to make the ships move again?
A key trigger was the interim peace deal between the US and Iran, under which Tehran pledged to help restore shipping through the Strait of Hormuz to pre-war levels within 30 days.
Several developments followed:
-Iran agreed to facilitate maritime traffic and ease restrictions on vessels entering and leaving the Gulf.
-The United States agreed to lift the blockade of Iranian ports as part of the deal.
– The Joint Maritime Information Center downgraded the threat level in and around the strait from “severe” to “substantial.”
-Tankers that have been stranded in the Persian Gulf for months have begun to depart.
– Major Gulf exporters, including Saudi Arabia, the United Arab Emirates and Qatar, have resumed some shipments with vessel tracking systems on, a sign of growing confidence.
Despite the progress, shipping groups and insurers remain cautious, citing concerns about mine clearance, navigation routes and the absence of a fully operational traffic control system.
Why is the Strait of Hormuz so important?
The Strait of Hormuz is one of the world’s most important energy choke points.
It is located between Iran and Oman and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, the waterway is only about 33 kilometers (21 mi) wide, making it very vulnerable to disruption.
Its importance arises from the enormous amount of energy that passes through it:
Roughly one-fifth of global oil consumption moves through the strait.
It is the main export route for oil from Saudi Arabia, Iraq, Kuwait, UAE and Iran.
Qatar, one of the world’s largest exporters of LNG, relies heavily on the route to transport natural gas.
Millions of barrels of oil and large volumes of LNG pass through the canal every day.
Any disruption could quickly affect global energy markets, transport costs and fuel prices.
Which countries were most affected?
Saudi Arabia
Saudi Arabia, typically the world’s largest oil exporter, was among the hardest hit.
Although Riyadh has continued to export through its East-West pipeline to the Red Sea, the disruption has limited flexibility and increased transport costs. Several Saudi supertankers remained stranded in the Persian Gulf during the conflict.
Qatar’s LNG exports have been particularly vulnerable as most of its shipments pass through Hormuz. Any longer shutdown threatened gas supplies to key Asian and European customers.
The UAE faced disruption to oil exports, although some volumes could be diverted through alternative infrastructure.
Both countries are heavily dependent on Gulf export terminals and have limited alternatives to Hormuz, making them particularly vulnerable to any shipping restrictions.
Iran suffered from both the disruption of shipping and the US restrictions on its ports. The reopening offers Tehran an opportunity to boost exports and restore lost revenue.
Major energy importing countries such as China, India, Japan and South Korea have been indirectly affected by supply uncertainty, higher freight rates and the risk of rising oil and gas prices.
Read also | Netanyahu faces a backlash at home after Trump cut him out of talks with Iran
Brent hits three-month low after US-Iran peace deal
Oil prices fell nearly 3% on Thursday as an interim peace deal between the US and Iran boosted the global supply outlook.
The deal includes plans to end the conflict, reopen the Strait of Hormuz and ease sanctions on Iran.
Brent crude futures were down $1.53, or 1.9%, at $78.02 a barrel.
U.S. West Texas Intermediate (WTI) crude was down $2.22, or 2.9%, at $74.57 a barrel.
Brent crude hit its lowest level since March 2, the first trading day after the initial US-Israeli strikes on Iran.
WTI hit its lowest level since March 4.
Will oil prices go down further?
The reopening of Hormuz is generally bearish for oil prices as it eases fears of supply disruptions.
Several factors are already helping to ease market concerns:
-More stranded oil cargoes are reaching global markets.
-Saudi, Emirati and Qatari exports are starting to normalize.
-Iran’s exports may increase after US restrictions are lifted.
-China has cut some oil purchases, while U.S. crude exports remain strong, helping balance global supply.
The direction of prices will depend on whether the volume of transport continues to grow in the coming weeks. If traffic returns to near pre-conflict levels and Gulf producers resume limited output, oil prices could face further downward pressure. If security concerns persist or the peace deal falters, risk premiums could quickly return to the market.
Read also | Trump Defends Iran Deal at G7, Says Averted ‘Economic Disaster’
