A deal between the two nations has been reached in principle that partially reopens the Strait of Hormuz

Iran and Oman have spent the past month negotiating new vessel traffic arrangements for the Strait of Hormuz, the world’s most important oil shipping corridor. This week, Iran said the two countries had reached an agreement in principle covering almost all outstanding issues, including new entry and exit routes for maritime traffic. Iranian officials stressed that the framework does not amount to a full reopening of the strait, as wider normalisation still depends on the United States lifting its blockade on Iranian ports.

While traffic through the strait has been limited, a few millions of barrels a day continued to cross the waterway during the past few weeks. Re-routing through the Red Sea has been increasingly more common in the past few weeks. This deal has the potential to increase tanker activity passing through the strait, increasing vessel utilization and decreasing oil prices. However, vessel owners may still delay passages through the strait despite a deal due to insurance premiums or potential vessel attacks. As the Islamic Republic News Agency states, any deal would not guarantee safe navigation of the waterway.

Sources: Bloomberg, Islamic Republic News Agency & TradeWinds