The administration of Donald Trump, the President of the United States, has rejected the proposal from the Islamic Republic of Iran to reopen the Strait of Hormuz. This proposal was made to reduce tensions in the region and increase the flow of oil from this strategic waterway, but its rejection has significantly brought political risks back to the oil market.
Iran's Proposal and the U.S. Response
Iran had requested the reopening of the Strait of Hormuz within seven days and a halt to regional conflicts in this proposal. Abbas Araghchi, Iran's Foreign Minister, stated that this proposal was conveyed to the United States through mediation by Qatar, and if accepted, the two sides could initiate broader negotiations. Tehran also demanded the lifting of the blockade on Iranian ports, the release of frozen financial resources, and the removal of U.S. oil sanctions.
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However, reports indicate that U.S. officials have rejected Iran's proposal. This has particularly increased pressure on oil prices at a time when progress in negotiations between Iran and the U.S. was expected.
Increase in Oil Exports from the Strait of Hormuz
Despite political tensions, shipping data shows that oil exports from the Strait of Hormuz continue to rise. According to Kepler data, in the week starting September 20, the flow of crude oil exiting the Strait of Hormuz reached 33.7 million barrels, with these shipments being transported by 19 tankers, 17 of which were Very Large Crude Carriers (VLCCs). Most of the shipments were from Saudi Arabia, followed by Iraq.
However, ship traffic has not yet returned to pre-war normal conditions. On one day of the week, only 9 cargo ships passed through the strait, which is a significant drop compared to the 10-day average of 18 ships. Before the war, about 125 large commercial ships passed through the Strait of Hormuz daily.
At the same time, Saudi Arabia has resumed operations on the East-West pipeline, which allows oil to be transferred to the Red Sea and bypass the Strait of Hormuz. This line has been reactivated after damage to several low-capacity pumping stations, and estimates suggest that its return to full capacity may take 6 to 8 weeks.
Overall, although the increase in tanker traffic through the Strait of Hormuz and the activity of the East-West pipeline may alleviate supply pressure, a failure in negotiations or a resurgence of conflicts could increase the risk of disruptions in exports. In this context, the oil market is closely monitoring political and economic developments and is highly dependent on the official U.S. response to Iran's proposal.
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