US-Iran near Strait of Hormuz deal, but reopening still hinges on US concessions

The Strait of Hormuz may finally be inching towards reopening, but the latest diplomatic breakthrough comes with a large caveat: Iran wants the United States to make significant concessions before commercial shipping can fully resume.

Iran and Oman are close to finalising a temporary agreement that would establish new shipping lanes through the strategic waterway, Reuters reported, citing a US official. Under the proposed arrangement, vessels would enter through a route near Iran and exit through one near Oman, without paying tolls or fees.

But Tehran is making clear that an agreement with Oman is not, by itself, enough. iranian Foreign Minister Abbas Araghchi said negotiations with Oman are in their “final stages”, particularly over the precise transit route. However, he said reopening the strait remains conditional on Washington meeting Iranian demands.

Tehran’s price for reopening Hormuz

Iran’s Supreme National Security Council has laid out an expansive list of demands. Tehran wants Washington to permanently end military hostilities and threats against Iran and its regional allies, lift the naval blockade of Iranian ports and withdraw US military forces from the region.

It is also demanding compensation for war damage, the lifting of sanctions, and the unconditional release of frozen Iranian assets. TheSE demands go considerably beyond the technical question of maritime navigation. In effect, Iran is attempting to turn the reopening of Hormuz into part of a much larger political settlement with Washington.

The US has not publicly accepted those conditions. President Donald Trump, meanwhile, has described the current engagement with Tehran as “semi-negotiating” and said Washington is watching Iran’s deteriorating economic situation rather than rushing towards a deal.

That leaves the most important question unanswered: can an agreement over shipping be separated from the much broader US-Iran confrontation?

Why Hormuz matters to the world

The answer matters far beyond the Gulf. The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman and the Arabian Sea and is one of the world’s most important energy chokepoints. Before the conflict, roughly 20 million barrels of oil a day moved through the strait, equivalent to about one-fifth of global petroleum consumption. Around one-fifth of global LNG trade also passes through Hormuz, with Asian economies among the principal destinations.

That is why even the possibility of reopening has immediate consequences for oil prices, shipping costs, inflation and the outlook for energy-importing economies. Brent crude rose about 1% on Monday to around $84.40 a barrel as markets tempered expectations of a rapid reopening. Oil prices had fallen sharply the previous week on hopes that an agreement was imminent.

For India and other Asian economies, the stakes are particularly high. Much of the LNG moving through Hormuz is destined for Asia, with India, China, and South Korea among the biggest recipients.

A diplomatic opening, but no breakthrough

The proposed Iran-Oman arrangement is significant because Oman has long played a role as a mediator between Tehran and Washington. The deal is expected to have backing from Gulf Cooperation Council countries and could eventually be announced jointly by Iran, Oman, the United States and the International Maritime Organization.

Yet the politics around it remain fragile. Iran’s Revolutionary Guard has already stressed that reopening Hormuz depends on American compliance with Tehran’s conditions, rather than simply the outcome of negotiations with Oman. Iranian lawmakers have also indicated that vessels from countries considered “hostile” could remain barred until compensation issues are resolved.

There is also a practical reality. Shipping through Hormuz has not completely disappeared, but traffic remains dramatically below pre-war levels. Around 130-140 vessels typically crossed the strait each day before the conflict; recent tracking showed only a handful of vessels making the journey.

The emerging deal therefore represents progress, but not normalisation. A temporary shipping arrangement could bring some relief to oil and freight markets. But a genuinely durable reopening would require something much harder: Washington and Tehran agreeing on the political terms of their post-war relationship.

Until that happens, Hormuz remains less a shipping lane, and more of a high stakes game of poker.