President Donald Trump declared that the Strait of Hormuz is now open and operating toll-free. But industry analysts — and members of his own administration — aren’t so sure.
Trump’s declaration of a peace agreement with Iran on Sunday provided some breathing room for the administration as oil and gasoline prices fell. But analysts said conflicting reports — including from Vice President JD Vance — on whether Iran still will be able to charge oil tankers to travel through the Strait of Hormuz and whether the Strait was in fact open to any traffic has kept oil shipping companies wary of resuming traffic through the key waterway.
Vance said Monday the issue of Iran charging ships a toll to move through Hormuz remains a point of contention ahead of the peace agreement signing later this week.
“Our expectation is that the Strait is going to be opened in a toll-free way for the long term, and that's the sort of thing that we're going to figure out in these technical negotiations,” Vance said in an interview on CNBC. “You know that there are a lot of very important details to figure out that we're actually going to sit at the table and discuss together and figure out a path forward on these details.”
On Monday, senior administration officials speaking on background told reporters that 25 ships a day are now passing and that they expected to get to 50 ships a day “pretty quickly.”
Hormuz will be open toll-free for 60 days, and the expectation is that a full reopening will be part of a final agreement, the officials said. Reopening will only be possible once all of the mines are cleared, they added.
“By Friday, everything will be fully open, I think,” a senior official said. “It will adjust very, very quickly, and I think, obviously, the prioritization will be on the heavy tankers, you know, the gas, the oil. So, I think that will actually flow very quickly.”
For now, the Joint Maritime Information Center, a service the U.S. Navy runs to issue security updates and risk assessments for commercial shipping, said Monday that the U.S. blockade of Iranian ports will remain in place until the ceasefire agreement is formally implemented on June 19. The advisory instructed seafarers and shipping companies not to attempt transits without authorization and maintained the maritime threat level in the Strait of Hormuz at "SEVERE."
Vance’s statement and the JMIC warning contrasted with Trump’s declaration on social media Sunday that he “hereby fully authorize[d] the toll free opening of the Strait of Hormuz.”
Trump’s announcement Sunday came more than three months after the United States and Israel started the war with Iran and, as critics note, that the strait was open. Iran’s attacks on ships moving through Hormuz at one point sent oil prices over $100 a barrel, dragging up the national average gasoline price past $4.50 a gallon. Prices have since fallen as the market expected the U.S. and Iran to reach a permanent peace settlement.
An initial memorandum of understanding that would lay the groundwork for further talks between the United States and Iran is expected to be signed on Friday in Switzerland, according to Pakistan Prime Minister Shehbaz Sharif. Vance said Monday the deal “immediately reopens” the Strait of Hormuz, stating that over the past 24 hours there’s already been more traffic flow.
Iran’s state-linked Tasnim News Agency, however, said that Iran intends to start charging ships for services after the 60-day period for technical negotiations around the deal.
"Iran is not interested in giving up control of the waters," Michelle Brouhard, head of policy and geopolitical risk at Kpler, wrote in a note Monday morning. "Iran has concluded that influence over the strait provides a form of leverage distinct from its nuclear program."
The White House did not immediately respond to a question about reports that Iran wants to impose tolls after the 60-day period ends.
Vessel traffic getting back to normal will take time, according to market intelligence firm Sparta Commodities, which said that “full Hormuz flows” within a week or two is optimistic. In a commentary Monday, Sparta said that even if politics stays on track this week ahead of the MOU signing, vessels that are still trapped on the wrong side of the strait “may find it slow going to exit.”
Another major consideration is the sweeping for mines, which takes time. Before the deal emerged this weekend, the International Energy Agency predicted "a minimum of two to three months" after mine clearing for steady exports to begin through the narrow passageway.
Maersk, a leading global shipping company, called the agreement a "welcome and positive development," but said it has not altered its operations in the Persian Gulf.
“Publicly available details are still limited, and it is too early to assess how it will impact logistics and maritime operations in the Middle East," the company, which has more than 700 container vessels and operates in more than 130 countries, said in a statement.
The conflicting statements from the two sides will likely slow the progress of reopening the strait, which keeps upward pressure on oil and gasoline prices. Oil companies have warned that dwindling inventories of gasoline and crude oil could push prices higher even if the strait reopens.
Statements from the United States and Iran are “unclear” and don’t give enough specific information about factors like timing and safe routes, said Jakob Larsen, chief safety and security officer at BIMCO, a trade association for shipowners, operators and more.
“Due to lack of details and a history of overly optimistic reassurances, we believe the security situation for the shipping industry remains volatile, and we still consider it very risky for ships to commence transits at this point,” Larsen said. BIMCO urges shipowners to continue doing risk assessments, he said.
INTERTANKO, the association representing independent tanker owners worldwide, told POLITICO that shipowners are hopeful but remain cautious as they assess the security situation and seek more information on potential mines in the region, how and when they will be cleared, and when it will be safe to resume transits through the Strait of Hormuz.
In the short term, the average price of a gallon of gasoline dropped below $4 for the first time since April, according to the pricing service GasBuddy. However, the American Automobile Association listed the average U.S. price as $4.07. The AAA average is down from $4.16 a week ago. However, gas prices are nearly a dollar higher since this time last year, when they were $3.13, AAA said. The week before the war started, the average was $2.98.
In a report last week, the U.S. Energy Information Administration said that U.S. commercial crude oil stocks — excluding the Strategic Petroleum Reserve — dropped by 7.2 million barrels from the previous week, falling to 426 million barrels. That put U.S. crude oil inventories at about 5 percent below the five-year average for that time of year, EIA said.
Scott Waldman contributed to this report.
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