Two Blockades

Strait of Hormuz Doubly Shut

The US has started a naval blockade of ships leaving Iran’s ports, raising the risk of open maritime warfare at the world’s most critical oil chokepoint.

There are now two competing blockades at the Strait of Hormuz, which normally handles about 20% of global oil and liquefied natural gas (LNG) flows.

• Iran has effectively shut the passage since the start of the war, allowing only Iranian vessels and a small number of foreign ships that have paid the new toll fee through.
• The US blockade went into effect on Monday. The American Navy aims to stop all merchant ships using Iranian ports.

Diplomacy Back in Play

The US and Iranian negotiators may soon resume talks after discussions in Pakistan collapsed without a breakthrough. Investors welcomed signs that diplomatic channels remain active despite the escalation at sea.

The parties could return to the negotiating table in Islamabad as soon as this week. Markets are cautiously optimistic, with oil trading below $100 per barrel and stocks modestly up.

Washington says progress has been made, but President Donald Trump is holding onto the condition of Iran not being allowed to get a nuclear weapon.

Europe Wants Oil Flowing

Europe is also stepping in. France and the UK are leading a 40-nation effort to keep the Strait of Hormuz open and toll‑free, arguing that freedom of maritime navigation is a global concern, not just a regional one.

Iran’s parliament has greenlighted a toll system at the strait, with some foreign tankers reportedly paying one dollar per barrel to pass. For the largest oil tankers, that amounts to $2 million per vessel.

The US opposes Iran charging fees on its own, but Trump has floated an idea of sharing the toll booth proceeds with Iran. Oman, which shares the Hormuz waters with Iran, opposes toll schemes.

Nuclear Talks Key to Reopening

Ceasefire talks are stuck on Iran’s nuclear program. The US has proposed a 20‑year suspension of all Iranian nuclear activity. Iran is arguing for a five-year pause.

Investors have taken this as a positive sign. The US and Iran are arguing over timelines. There could be room for a compromise.

But key issues remain unresolved:

• What would happen to the enriched uranium that Iran already has?
• Would Iran keep funding proxy groups like Hamas and Hezbollah?
• Is Iran willing to reopen the Strait of Hormuz without tolls?

IEA Reverses Forecasts

The International Energy Agency says the war with Iran has caused the largest oil supply shock ever recorded, and it is now starting to hurt the real economy.

IEA’s new outlook:

• Global oil demand is headed to the sharpest drop since the Covid-19 shock.
• Oil production is set todrop sharply as shipping through the Strait of Hormuz is disrupted and the Gulf infrastructure is damaged.
• Asia faces the biggest consumption cuts, with shortages particularly in jet fuel, naphtha, and LPG (used in cooking, heating, and vehicles).

Before the fighting, over 20 million barrels passed through the Strait of Hormuz daily. In early April, that fell to less than 4 million.