Oil prices have dropped below $72.48 a barrel for the first time since the day before the US and Israel launched attacks on Iran on 28 February, as traffic through the Strait of Hormuz gradually resumes. But the chief executive of one of the world's largest shipping companies has warned that mines left in the waterway will restrict shipping to half prewar levels for months to come.
Global benchmark Brent crude briefly fell to $72.48 (£55) before edging up to $73.23 on Wednesday, after the US and Iran signed a Memorandum of Understanding on 17 June setting out a 60-day period for negotiations. Representatives from both sides met in Switzerland last weekend for talks that led to the US partially lifting sanctions on Iranian oil exports.
“Oil falls to pre-Iran war level but mines restrict Strait of Hormuz shipping to half prewar levels.”
The number of vessels crossing the strait has risen significantly since the deal was signed, according to maritime intelligence firm Kpler. Its latest data shows 284 vessels have made the transit from 18 June – the day after the MOU – though that is still well below the pre-conflict average of about 138 crossings each day. The ships passing through include those carrying crude oil, liquefied natural gas (LNG), fertiliser and other goods.
But Takaya Soga, CEO of the Japanese shipping giant NYK, said safe routes through the strait remain “extremely limited” because of mines laid during the conflict. He warned that traffic would be restricted to half prewar levels until the mines are cleared, a process that could take months. The warning echoes concerns from Dimitris Maniatis, CEO of maritime risk advisory firm Marisks, who said a limited number of ships can cross a northern passageway with permission from Iranian authorities, while the US navy has provided guidance for a southern route safe from mines and other obstacles.
Despite the recent uptick, hundreds of ships are still waiting in the Gulf. “Markets are still watching the region closely, and any renewed tensions could quickly send oil higher again,” said Pratibha Thaker, regional director of Middle East and Africa at the Economist Intelligence Unit. Fuelling that risk: the US and Iran have formed a “communication line” to prevent misunderstandings, mediators Qatar and Pakistan said on Monday, aimed at safe passage for commercial vessels – an acknowledgment that the situation remains fragile.
With fuel prices at the pump having risen sharply when the war began, attention is now on how quickly they will fall. Soga’s warning suggests that even if diplomacy holds, the physical remnants of war could keep the strait below capacity for months, leaving the oil market – and motorists – waiting.