Iran Threatens Strait of Hormuz Passage After Truce Collapse

Iran reopened fire on vessels near the Omani shoreline on July 7 after interpreting U.S.-encouraged alternate routes as a threat to its position. The U.S. responded with nightly strikes on Iranian targets, including civilian bridges, while Iran struck installations in the United Arab Emirates, Kuwait, and Bahrain.

The 60-day memorandum of understanding reached in mid-June allowed limited tanker traffic to resume, but volumes remained below normal levels. Oil prices fell from a May peak of $124 per barrel to $68 in early July before climbing back above $88 by July 17.

Energy Supply and Price Effects The U.S.

Strategic Petroleum Reserve sits at a 43-year low. Global stockpiles have declined while refinery outages continue in the Middle East, China, and Russia. The average U.S. price for regular unleaded gasoline has returned to $4 per gallon. Gregory Brew, senior analyst for Iran and energy at the Eurasia Group, said Iran holds considerable leverage and that no military option exists for reopening the strait.

He added that the Iranian regime views the waterway as belonging to it following the earlier phase of the conflict. Dan Pickering, founder of Pickering Energy Partners, stated that the fifth month of the conflict leaves fewer strategic reserves and less flexibility than at the start.

Claire Jungman, director of maritime risk and intelligence at Vortexa, noted that the core question is whether the strait remains reliably open at all. Neighboring states are expanding pipeline capacity to reduce reliance on the strait. The UAE is doubling its West-East pipeline and planning a new port at Fujairah.

Iraq is constructing the Basra-Haditha Pipeline, and Saudi Arabia has increased shipments through the Red Sea. The U.S. position maintains that Iran cannot charge fees for passage, though analysts cited in the reporting described such fees as increasingly difficult to prevent.