Iran to coordinate Strait of Hormuz transits under ceasefire

According to Seatrade Maritimes News, two-week ceasefire has been agreed between the United States and Iran in a conflict that has all but paralyzed one of the world’s most important shipping lanes.

The ceasefire was agreed with mediation by Pakistan just 10 minutes before a deadline by US President Trump, after which the US was attack Iran’s bridges and energy infrastructure if Iran did not fully reopen the Strait of Hormuz.

Pakistan's Prime Minister Shehbaz Sharif, "With the greatest humility, I am pleased to announce that the Islamic Republic of Iran and the United States of America, along with their allies, have agreed to an immediate ceasefire everywhere including Lebanon and elsewhere, effective immediately."

Ahead of the announcement that the ceasefire had been agreed Trump posted on Truth Social, said that he had agreed to suspend the bombing and attack of Iran, “subject to the Islamic Republic of Iran agreeing to the complete immediate, and safe opening of the Strait of Hormuz”.

However, a statement from Iran’s Minister of Foreign Affairs Seyed Abbas Araghchi framed the re-opening of the Strait somewhat differently with Iran coordinating and controlling transits of the key waterway.

“For a period of two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration to technical limitations.”

The statement by the Iranian Foreign Minister was reposted on Trump’s Truth Social feed.

Associated Press reported, quoting an undisclosed regional official, that ceasefire plan allows the littoral states of Iran and Oman to charge a fee for transit of the Strait of Hormuz. In recent weeks Iran has been reportedly charged US$2 million in either Chinese Yuan or crypto currency for approved transits of the waterway.

In a later post on the Truth Social Trump said, "The United States of America will be helping with the traffic buildup in the Strait of Hormuz." No details of given as to what this help might entail.

One of the points of Iran’s 10 point-proposal as a basis for negotiations is “the continuation of Iran’s control over the Strait of Hormuz”, Iran’s Supreme National Security Council stated. Talks between the two sides are scheduled to start in Islamabad on Friday. 

The effective closure of the Strait of Hormuz by Iran since the conflict started on 28 February created a global energy crisis with around 20% of the world’s crude oil and LNG exported from the Arabian Gulf via the Strait.

The oil price dropped sharply on news of the ceasefire dropping below US$100 per barrel. WTI Crude is trading at US$97.36 down 13.8% and Brent Crude is US$95.36 down 12.73%.

Despite the declaration of the ceasefire strikes are reported to be continuing in Iran and Israel as well as regional countries including Bahrain, Qatar, UAE, and Saudi Arabia.

Assuming the ceasefire hold how much shipping traffic will move through the Strait of Hormuz given the fragile security situation.

Certainly, owners will be keen to move an estimated 1,000 international trading ships with some 20,000 crew stranded in the Gulf since the start of the war on 28 February out of the region.

However, westbound transits of the Strait to load cargoes risk a restarting of the conflict and that these vessels would become trapped in the region in the face of renewed hostilities.