Why Restoring Normal Traffic Through Hormuz Won’t Be Easy

Alaric Nightingale and Paul Burkhardt

The US and Iran have committed to reopening the Strait of Hormuz, the world’s most important artery for shipping oil and natural gas, which has been largely blocked since the two countries went to war in February. However, returning traffic in the strait to prewar levels — if that day ever comes — presents significant challenges. The prediction market Kalshi assigns a 51% probability that traffic will return to normal before Aug. 1 and a 68% probability before Sept. 1.

Here’s a look at the main impediments:

Mine threats

Iran is thought to have mined what was the normal shipping channel through Hormuz, which connects the Persian Gulf to the Indian Ocean and is situated between Iran to its north and the United Arab Emirates and Oman to its south. The threat of mines has forced ships to sail instead near Iran’s coastline or closer to Oman’s. Use of the southern route, overseen by US forces, has already allowed oil flows to creep higher. But the question of how much traffic the alternative routes can handle has not been fully tested.

Clearing the center of the channel of any mines would help to get flows back to normal. A 14-point agreement between Iran and the US signed by President Donald Trump on June 17 refers to the need for Iran to neutralize mines. Demining could take weeks.

The risk of attacks

On top of the threat of mines, there’s the risk of further violence that could affect ships and their crews. The fragile ceasefire the US and Iran have had in place since April 8 hasn’t stopped fighting altogether. At least 14 seafarers have died in this conflict, and there have been 46 attacks that damaged ships, according to the United Nations’ International Maritime Organization (IMO).

Merchant sailors are nervous about working in conflict zones at the best of times, so the shipping industry wants to be confident that hostilities have truly ended. There’s still caution and a desire for greater clarity from owners and insurers. Even then, several shipowners said some crews may be reluctant to return to the Persian Gulf, which could reduce the number of vessels sailing to the region to collect cargoes.

Uncertainty about who’s in charge

Until the war began, freedom of navigation was, with a few exceptions, taken for granted in Hormuz, just as it is in all major shipping straits. It’s not clear whether that will remain the case in the future. Under the 14-point agreement, Iran and Oman are meant to “define the future administration and maritime services” in the strait in discussion with other states on the Persian Gulf.

Several shipowners told Bloomberg they’d rather not be forced to communicate with anyone, but especially not an Iranian regime that’s still under US sanctions, when sailing through waters that are meant to be subject to freedom of navigation rules.

The Baltic and International Maritime Council, the world’s top trade group for shipowners, says it must be clarified who, if anyone, will coordinate transits in the future. It suggested that either a United Nations organization, or a neutral state, could be involved.

The possibility of tolls or fees

It’s unclear whether vessels will eventually be charged to pass through Hormuz. The US-Iran deal states that a fee-free period will end after 60 days.

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The UN’s IMO said in April that there’s no legal basis for charging Hormuz tolls, and the US has said in the past that paying them would be a sanctionable act. Thus, shipowners are terrified of having to pay Iran for passage and risk getting blacklisted by US sanctions authorities. At the same time, at least one senior US government official acknowledged that paying for transit might become a possibility.

Big energy companies are apt to object to any tolls or fees. Chevron Corp. Chief Executive Officer Mike Wirth said on Bloomberg Television in May that his company would not consider paying to pass through the strait.

Stalled oil and gas production

Stalled oil and gas production is perhaps the biggest impediment to fully normalizing trade flows through the Strait of Hormuz. Before the war, it handled around a fifth of the world’s oil and liquefied natural gas supply. The increased use of bypass routes provoked by the war has reduced the strait’s centrality, but only by a little.

In some cases, oil and gas production was halted because, with Hormuz blocked, exports became impossible. Shutting down a well, even voluntarily, can degrade its efficiency and cause long-term operational losses. In other cases, war damage caused shutdowns. Rebuilding oil and gas infrastructure in the region will cost roughly $42 billion, according to Rystad Energy.

While the infrastructure restarts, tankers previously serving the Persian Gulf that scattered to other routes or were demobilized will need to be repositioned. Rystad analysts said that should take about two months. They assess that the big increase in output from the region will come in August and September, as fields return to productivity. Some 85–90% of the lost volume will be recovered by early in the fourth quarter of the year, they project, rising to 100% only in January 2027.

(Updates with details of 14-point US-Iran deal)

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