Why US-Iran ceasefire has not led to Hormuz reopening

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Maritime traffic through the Strait of Hormuz – a vital route for exports of oil, natural gas and other commodities from the Persian Gulf – remains severely constrained by Iran, even after a US-Iran ceasefire took effect on April 8. 

The 14-day truce, which the US said is conditional on Iran unblocking Hormuz, has yet to translate into a meaningful increase in shipping. Just a handful of vessels were observed making the voyage out of the Persian Gulf on April 8 and the morning of April 9. Under normal conditions, about 135 vessels traverse the strait every day. 

Tehran says the strait is open but that passage depends on coordination with its military and adherence to strict, designated routes. Iran’s continued control over the waterway has left ship owners and crews wary of attempting to cross, and a global oil supply crunch has not eased. 

Why hasn’t the ceasefire led to the reopening of Hormuz?

Since the US and Israeli launched the war on Iran on Feb 28, Iran has asserted control over the waterway and effectively halted most commercial traffic. The country has sporadically attacked ships in and around the Persian Gulf and may have laid mines in Hormuz.

It has allowed certain vessels to cross the waterway in a route that hugs the Iranian coast, often after talks for safe passage and sometimes after requesting payments of as much as US$2 million (S$2.5 million). 

Iran has continued to move its own oil through Hormuz, maintaining its shipments at close to pre-war levels.

Shipowners say those conditions have not clearly changed despite the ceasefire. Iran broadcast to maritime traffic on April 8 that its permission was required to traverse the sea corridor. It has said vessels will be limited to two narrow routes running close to its shoreline to avoid anti-ship mines, which it says have been laid in the usual shipping lanes near the southern side of the strait.

Most shipowners have remained unwilling to risk the loss of life, cargo and vessels. “You don’t switch global shipping flows back on in 24 hours,” said Adjunct Professor Jennifer Parker at the University of Western Australia Defence and Security Institute.

“Tanker owners, insurers and crews need to believe the risk has actually reduced – not just paused.”

What is the significance of Hormuz?

Situated between Iran to its north and the United Arab Emirates and Oman to its south, the Strait of Hormuz connects the Persian Gulf to the Indian Ocean. It is around 161km long and 38.6km wide at its narrowest point. The shipping lanes in each direction are just 3.2km wide.

The strait is an essential passage for the oil market, handling about a quarter of the world’s seaborne oil trade. Saudi Arabia, Iraq, Iran, Kuwait, Bahrain, Qatar and the United Arab Emirates all ship crude through Hormuz, and the majority of their cargoes go to Asia.

Gulf countries are also home to refineries that produce large volumes of diesel, naphtha – used to make plastics and petrol – and other petroleum products that are exported globally via the strait.

Beyond energy, Hormuz is a choke point for products including aluminium, fertiliser and even helium, which is used in the production of semiconductors.

What would it take to reopen Hormuz?

Some shipowners may be willing to negotiate passage with the Iranian authorities. Tehran has previously given permission to vessels from countries, including Pakistan and Malaysia, to cross the strait, and Thailand is seeking clearance for nine ships stranded in the Persian Gulf.

Reopening Hormuz to international traffic will require shipowners to be convinced that their crews and vessels will be safe. It may also need Tehran to drop its demands that vessels take the route through Iranian waters and pay a fee to cross the waterway.

Beyond that, if ships are to return to the southern route, owners and crews will need to be sure that it is free of mines.

Even if those conditions are met, the sheer number of ships waiting to cross the strait in both directions will cause its own difficulties. With no traffic management system in place, some method of scheduling transits will be needed.

There are designated traffic separation lanes along both the traditional southern route and Iran’s new northern passage, which should reduce the risk of collisions.

Does Iran have the right to control Hormuz?

Iran has signalled that it intends to continue exercising control over Hormuz transits and monetising this leverage even once the war is over. A Bill is making its way through Parliament that enshrines Iranian sovereignty over the strait in national law and formalises a toll system for ships crossing the waterway, according to the semi-official Fars news agency.

Under the United Nations Convention on the Law of the Sea (UNCLOS), countries can exercise sovereignty up to 12 nautical miles from their coastline – an area known as their territorial waters. The Strait of Hormuz runs through the territorial waters of Iran and Oman.

However, nations must allow “innocent passage” of foreign vessels through their territorial waters and must not impede “innocent” or “transit passage” through straits used for international navigation. The treaty also says that countries cannot charge foreign ships merely for passage through their territorial waters.

While Iran signed UNCLOS in 1982, its Parliament never ratified the treaty.

The head of the world’s main shipping agency, the International Maritime Organization, said on April 9 that any efforts by Tehran to permanently enforce a toll system on Hormuz are unacceptable and would set a dangerous precedent. BLOOMBERG