Mixed messages on Strait of Hormuz create uncertainty for oil

Energy & Environment Mixed messages on Strait of Hormuz create uncertainty for oil Comments: by Rachel Frazin - 06/22/26 3:04 PM ET Comments: Link copied by Rachel Frazin - 06/22/26 3:04 PM ET Comments: Link copied

NOW PLAYING

Mixed messages from the U.S. and Iran on the Strait of Hormuz are injecting further uncertainty into the future of the waterway and global oil supplies.

Over the weekend, the Iranian military said that it would close the strait in response to Israeli strikes in Lebanon. At the same time, Washington said the waterway was open.

U.S. Central Command said over the weekend that commercial ship travel through the waterway “increased” on Saturday and that safe passage “remained intact.”

But, even if the strait is open, it is still expected take some time for prewar shipping levels to be restored as the world waits to see what will ultimately happen to the key oil choke point.

“Everything’s unpredictable,” said Patrick De Haan, head of petroleum analysis at GasBuddy, on Monday, when asked what he thinks ship traffic will look like during the agreed-upon 60-day ceasefire.

“We can hope that shippers are going to gain enough confidence, but I don’t know if tomorrow … Iran is going to change its mind, or if Trump is going to change his mind,” he added.

Generally speaking, De Haan said, he believes things will trend in a positive direction, since both the U.S. and Iran have incentive to make a deal.

“Americans and their affinity for cheap energy is kind of a driving power right now,” he said. “Imagine the pressure of seeing … $5 gas and $6 diesel, that would really be the undoing of the GOP under Trump.”

As for Iran, the country appears to get significant wins in the peace agreement, including a temporary lifting of U.S. sanctions on its oil.

Oil markets appeared stable Monday afternoon, with U.S. benchmark West Texas Intermediate crude trading at about $75 per barrel, down slightly from its price late last week.

Since the start of the war earlier this year, Iran has effectively closed the Strait of Hormuz, a key oil shipping lane off its coast through which about 20 percent of the world’s oil typically travels.

The closure strained oil supplies, sending the prices of oil itself and oil-based fuel, including gasoline, skyrocketing.

In the U.S., the national average gas price reached as high as $4.56 per gallon. On Monday, the average was down to about $3.93, according to AAA.

A memorandum of understanding (MOU) announced last week stated that Iran “will make arrangements … for the safe passage of commercial vessels with no charge for 60 days” through the strait.

For the long term, the agreement said Iran would “conduct dialogue” with neighboring Oman “to define the future administration and maritime services in the Strait of Hormuz.”

In the wake of the most recent closure, several trackers showed less traffic, but it’s not clear why.

“On Saturday the 20th, Vesseltracker counted around 50 vessels entering the Strait, but that number was cut roughly in half the following day. There is some uncertainty around what drove that drop,” said Christopher Aversano, director of maritime partnerships for Wood Mackenzie, referring to the firm’s vesseltracker.com, in a statement to The Hill.

“It is unclear whether vessels simply switched off their AIS tracking, or whether they held back due to Iran’s declaration that the Strait was closed,” Aversano added, using an abbreviation for automatic identification system.

At the same time, even before the latest closure, there was uncertainty in the process.

Tom Kloza, chief oil analyst for Gulf Oil, told The Hill last week that he believed the market was “overreacting with a little too much unbridled optimism.”

“The MOU does not explain anything about how they’re going to measure compliance, how they’re going to police the strait,” Kloza said, adding that the agreement punts on “most of the difficult issues, the issues related to compliance, whether it be for the Strait of Hormuz or for nuclear compliance.”

Clay Seigle, nonresident scholar in energy security at the Center for Strategic and International Studies, told The Hill last week that “ship owners will probably be cautious, and they’ll probably be gradual about moving to resume normal activities.”

“People are waiting to see whether credible players … big names in the mainstream, are once again assuming the risk of operating like prewar in the Gulf,” Seigle said.

He noted, in a conversation prior to the weekend announcement, that things will be more uncertain going forward because “now we know Iran always has the option of getting strict with tolls and/or resuming hostilities against shipping or assets.”

But some were optimistic that oil shipping would get off the ground, even if it takes time.

Aversano told The Hill last week that in the months ahead, he expects to see more commercial ships going through the strait because of the MOU.

But he also said “it’s going to take some time to relocate ships from current trading patterns, which have been altered over the past three and a half months.”

As far as prices at the pump are concerned, De Haan predicted they could be at around $3.70 per gallon by July 4, or $3.65 “if things go really well.” If things go poorly, he said, they could be back to more than $4 per gallon.

Kloza similarly projected that gasoline prices could be $3.75 by July 4 weekend. He said after that, it becomes harder to predict. Around the midterms, he thinks prices will be “modestly above last year.”