Iran and Gulf states convene in Oman to explore a temporary shipping arrangement in the Strait of Hormuz amid rising oil prices.
Iran and Gulf countries will discuss a temporary arrangement that could partially open shipping traffic in the Strait of Hormuz today in Oman. With Brent crude oil hovering around $108, the plan on the table could change the direction of energy markets.
A new diplomatic initiative is beginning that could alleviate the maritime traffic crisis that has persisted in the Strait of Hormuz for months. Foreign ministers from the Gulf Cooperation Council countries and Iranian officials will meet in Salalah, Oman, to discuss a temporary arrangement that will ensure safer passage for ships through the strait.
The meeting will be one of the first high-level joint contacts between Iran and Gulf countries following military operations by the U.S. and Israel against Iran. The plan, which has been shaped by bilateral talks between Oman and Iran over the past weeks, is now expected to be presented for the support of Gulf countries.
The temporary formula being worked on envisions ships entering the Strait of Hormuz from Iranian waters and exiting from Omani waters. The aim is to create a more predictable and secure passage route for commercial vessels in a strait that is not yet fully open.
If this arrangement is accepted, normalization may begin for a portion of oil and liquefied natural gas shipments passing through Hormuz. An increase in maritime traffic could also help reduce the geopolitical risk premium that has been added to oil prices in recent weeks.
While Brent crude oil was around $108 this morning, prices rose above $109 during the week. A strong indication that transitions in Hormuz may increase again is seen as one of the developments that could limit the upward pressure that has formed in the oil market in recent days.
However, the formula on the table does not mean that the Strait of Hormuz will be fully and permanently reopened. While Gulf countries want the temporary arrangement to ensure safe passage, they oppose Iran gaining permanent control or the right to charge fees over the strait.
The most significant obstacle to permanent normalization in Hormuz is the disagreement between Iran and the U.S. Tehran demands the lifting of American sanctions, broader permission for oil exports, and access to some of its frozen assets.
It is considered difficult for maritime traffic in the Strait of Hormuz to return to pre-war levels without a comprehensive agreement on these issues. Therefore, any potential compromise that may emerge from the talks in Oman is seen more as a temporary relief that will buy time for the markets rather than a permanent solution.
The security risk is not limited to Hormuz. The activities of the Houthis along the Red Sea coast in Yemen are increasing the risk of maritime transportation around Bab el-Mandeb. Energy markets are thus closely monitoring developments in two critical maritime passages in the world.
Reaching an agreement on a temporary corridor in Hormuz is significant not only for the oil exports of Gulf countries but also in terms of global inflation and interest rate expectations. While an increase in maritime traffic could alleviate pressure on oil prices, a failure of the talks could increase the risk of prices remaining above $100 for a longer period.
Source: SeaNews Türkiye
