Strait of Hormuz: US declares safe passage while Iran-Oman drafts separate accord

The US Central Command (CENTCOM) has declared the southern route through the Strait of Hormuz “free and open” for all commercial vessels seeking to transit the international waterway.

IMAGE: Getty Images

The statement comes as the global oil market awaits a final decision from Iran and Oman, after reportedly completing a draft agreement to reopen the strait to all commercial navigation.

The vital chokepoint between Iran and Oman carries roughly 20% of global seaborne crude oil flows.

Yesterday, Iranian officials said it is in the “final stage” of drafting an agreement with Oman over the Strait of Hormuz, the Associated Press reported. The news has dragged Brent’s price below the $80/bbl threshold.

If finalised, the agreement has a potential to reopen the critical waterway – easing some pressure on the world economy.

The arrangement will allow ships entering the Persian Gulf through the strait to be administered by Iran, while vessels leaving the region will use a route controlled by Oman, Al Jazeera reported.

Transit toll debate remains

The proposed transit fee, or toll, imposed on commercial vessels remains a key factor in the ongoing negotiations, with Reuters reporting that Tehran is pushing for a 5% to 7% levy on cargo worth, while Oman seeks a more modest 3% alternative.

Washington has repeatedly rejected any arrangement under which merchant vessels will be required to pay Iran for the passage through the international waterway.

Earlier this week, eight global shipping associations warned that any compulsory charges for transiting the Strait of Hormuz will raise costs across supply chains.

As a critical chokepoint handling roughly one-fifth of global oil flows, any transit costs in the region will feed directly into voyage costs for tankers moving through it, the shipping associations claimed.

Meanwhile, traffic through the strait lingers well below its usual volume. Eighteen ships crossed the strait yesterday, according to market intelligence firm Windward, compared with an average of 130 to 140 transits recorded before the US-Israel war against Iran started.

By Aparupa Mazumder

Please get in touch with comments or additional info to news@engine.online