Iran and Oman have finalized details for new entry and exit routes for ships navigating the Strait of Hormuz, a critical global chokepoint for energy exports. These new arrangements, which place Iran at the center of traffic management, will be presented to other Gulf states at a regional meeting in Muscat on September 14. Under the proposed plan, the inbound route will pass through Iranian territorial waters, as will a portion of the outbound route. Iran states that the southern route, previously backed by the United States, will be closed once the new system is operational.
Despite these agreements, the Strait of Hormuz will not be fully reopened. Iranian officials have made it clear that the waterway will remain closed until seven specific conditions, conveyed to the United States, are met. This comes as traffic through the Strait remains dramatically below normal levels; before the conflict, approximately one-fifth of global oil supplies moved through Hormuz, but recent data indicates a significant reduction, with only about 10 commodity ships crossing daily in early September.
The ongoing disruption in the Strait has led to a sharp increase in oil prices, with Brent crude nearing $100 a barrel and a weekly gain of over 8% by September 11. Goldman Sachs has warned that oil could reach $120 a barrel if attacks on Middle Eastern shipping escalate. The International Energy Agency has also highlighted potential global oil supply gaps. While alternative pipelines like Saudi Arabia's East-West pipeline (7 million barrels per day capacity) and the UAE's Abu Dhabi Crude Oil Pipeline ($1.5 million barrels per day capacity) exist, they cannot fully compensate for the approximately 20% of global oil supplies that normally transit Hormuz. Further complicating matters, Saudi Arabia's East-West pipeline, accounting for 4-5% of global oil supply, was temporarily shut down after a drone attack, exacerbating supply concerns.
