The United States and Iran have reached a deal in principle to reopen the Strait of Hormuz, according to a U.S. official. However, the lack of a formal agreement leaves many questions unanswered, including when normal shipping will resume and when oil prices will decrease.
Approximately 1,500 to 2,000 ships have been trapped in the Persian Gulf due to the ongoing conflict. The strait is a crucial passageway through which about 20 percent of the world’s oil and natural gas supplies moved before the conflict began on February 28.
Carl Weinberg, chief economist of High Frequency Economics, noted that prices are unlikely to drop quickly, emphasizing the uncertainties surrounding the situation.
The details of the agreement remain unclear, particularly regarding Iran’s control over the strait and whether it can levy fees for passage. On Sunday, a military adviser to Iran’s supreme leader asserted the country’s legal right to manage the strait, hinting at potential leverage for raising funds.
Even if the strait is reopened soon, shippers must assess the durability of the peace agreement and the safety of sending tankers through the narrow waterway.
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