Iran and Oman have reached an agreement on the specifics of new entry and exit routes for ships transiting the Strait of Hormuz, Iranian officials confirmed on September 13. While this marks a step towards establishing a controlled passage for commercial vessels through the world's most vital oil chokepoint, the strait is not yet fully open.
The details of the arrangement are anticipated to be presented to other Gulf states at a regional meeting scheduled for September 14 in Muscat. An Iranian source indicated that the agreement creates new routes for vessels entering and leaving the Persian Gulf, but full reopening of Hormuz is contingent on Tehran's conditions involving the United States being met.
New Routes, Lingering Restrictions
The proposed arrangement builds upon a framework for a temporary navigation corridor discussed between Iran and Oman in August. Under the new plan, the inbound route will primarily traverse Iranian territorial waters. A section of the outbound route will also pass through Iranian waters. Iranian officials previously stated that the temporary corridor would be approximately 7 miles (11.3 km) wide.
A key aspect of this latest understanding is that it places Iran at the center of traffic management through the proposed corridor. Tehran had previously opposed a southern route, favored by Washington and Oman, arguing it infringed upon Iranian sovereignty. Oman and Iran had also previously agreed on establishing a joint temporary navigational corridor and collaborating on mine clearance, alongside technical discussions for a permanent corridor, information sharing, traffic management, and navigation and security services.
Navigational Challenges and Collapsed Traffic
For global shipping, this agreement comes at a time when traffic through the Strait of Hormuz remains drastically below normal levels. Before the current conflict, roughly one-fifth of the world's oil supplies transited Hormuz daily. However, shipping activity has plummeted since the conflict began.
In late August, ship-tracking data indicated that daily traffic had fallen from over 100 vessels to approximately five. While some vessels continue to make the crossing despite the risks, Kpler data showed 112 oil and gas tankers, carrying crude, LPG, and LNG, crossed the strait between August 1 and August 19. Of these, 21 openly used the Iranian route, only two formally used the Omani route, and many others utilized unconfirmed passages.
More recent Reuters data highlights the limited recovery, with an average of only 10 commodity ships per day crossing Hormuz during a 10-day period in early September, marking the lowest level since May. For shipowners, the existence of a legal route is only one factor; insurance costs, naval threats, mine risks, potential attacks, and uncertainty over jurisdictional control remain significant concerns.
Global Impact: Oil Prices and Beyond
The ongoing disruption has already driven oil prices sharply higher. As of September 11, Brent crude was on track for a weekly gain exceeding 8%, with prices remaining above $100 a barrel due to concerns over disrupted Gulf supplies. Goldman Sachs has warned that oil prices could escalate to $120 a barrel if attacks on Middle Eastern shipping intensify.
The danger extends beyond crude oil. Hormuz is also a crucial corridor for liquefied natural gas (LNG) and other energy cargoes. Prolonged disruption could therefore impact power markets, freight rates, petrochemical industries, and inflation far beyond the Gulf region. The International Energy Agency (IEA) has also cautioned that the global oil supply gap could widen if normal Gulf flows take longer to resume.
Limited Alternatives to Hormuz
While Gulf producers possess some alternative routes, none can fully replace the strategic importance of the Strait of Hormuz. Saudi Arabia's East-West pipeline, also known as Petroline, can transport up to 7 million barrels per day, allowing Saudi crude to reach Red Sea terminals without traversing Hormuz. The UAE's Abu Dhabi Crude Oil Pipeline (ADCOP) offers another bypass, carrying approximately 1.5 million barrels per day from Abu Dhabi's Habshan area to Fujairah on the Gulf of Oman.
Collectively, these alternative routes can mitigate some of the shock but cannot compensate for the approximately 20% of global oil supplies that typically transit Hormuz. An additional complication arose recently when Saudi Arabia temporarily shut its East-West pipeline following a drone attack, removing one of the most important alternatives just as Hormuz remains constrained. This pipeline accounts for an estimated 4-5% of global oil supply.
Bab el-Mandeb: Another Chokepoint Under Threat
The maritime shipping crisis is further complicated by threats from Houthi forces in Yemen to another major maritime chokepoint: Bab el-Mandeb. On September 11, Iran-aligned Houthi forces reportedly reached Perim Island, situated in the Bab el-Mandeb Strait, and also captured or advanced into the coastal town of Dhubab, according to Yemeni government sources cited by Reuters.
Bab el-Mandeb connects the Red Sea with the Gulf of Aden and serves as the gateway for vessels traveling between the Indian Ocean and the Suez Canal. If both Hormuz and Bab el-Mandeb face simultaneous threats, shipping companies would confront an extremely limited set of options. While the Iran-Oman understanding offers a potential mechanism for restoring some commercial traffic, it does not yet signal a return to normal navigation.