Apologies for the lack of updates – I’ve been away for a week. The cycle continues to cycle, with much unchanged, some truly not. In the past few weeks the ceasefire between the US and Iran, signed only a month ago, has effectively collapsed – yet again.
The MOU signed in mid-June set out a framework rather than a binding peace, since reopening a strait that had been mined and blockaded for months required more than just a signature. Following the MOU was a surge in traffic – 242 vessels transited the strait in the week to 28 June, against roughly 60 a week during the closure, and Iran exported around 70 million barrels during the truce. However, that surge was overwhelmingly the exit of a backlog already trapped inside the Gulf rather than a return of the two-way tanker process. Loaded vessels cleared cargoes that had been waiting for weeks and the empty tankers that needed to come back in to load the next round stayed deeply suppressed throughout.
The recovery never reached anything like normality, and its fragility was exposed early when an Iranian drone struck a cargo ship in the strait on 25 June, while the backlog was still clearing. The conflict that followed initially built steadily, if somewhat sporadically at first – further ship attacks on 6-7 July, and the US reimposing oil sanctions and striking more than eighty targets. In the past week or so it has gone well past where it stood before the MOU, with eight consecutive nights of American strikes on Iranian command centres, missile sites, coastal radar and the approaches to the strait. Iran has hit back across the region, targeting US facilities and American partners in Kuwait, Jordan, Bahrain, Qatar and Oman, while also claiming an attack on a US base in Saudi Arabia.
Tehran has now formally suspended its participation in the MOU altogether, with Supreme Leader Mojtaba Khamenei declaring that the repeated breaches have shown Trump’s signature to be “utterly worthless and devoid of credibility”. Iran puts its own toll at 50 dead and more than 500 wounded since fighting resumed. Two US service members were killed by an Iranian strike on American forces in Jordan on the night of 17-18 July, bringing the total to sixteen US deaths over the course of the war.
The blockade has moved from threat back to enforcement over the same stretch. American forces disabled the oil tanker Belma with Hellfire missiles on 15 July as it tried to run the blockade toward Kharg Island, the terminal which handles roughly 90% of Iran’s crude exports. This was the first time this round of the blockade had been enforced with weapons, rather than through warnings, boardings, and orders to turn back. Tanker traffic through the strait has subsequently fallen to its lowest level since May – only six oil and gas tankers crossed on 12 July, and only three commodity tankers on 16 July. The US Energy Secretary, however, claimed on Friday that American assistance was still helping roughly 7 mb/d leave the Gulf, which is a much broader and less verifiable figure than the confirmed transit counts, and one increasingly complicated by vessels operating without visible tracking signals.
A toll proposal came and went almost as quickly as it appeared. Trump floated a 20% fee on strait cargo on 13 July and dropped it the next day for vague talk of investment deals with Gulf states, the third toll idea aimed at this waterway in four months, after Iran’s own transit fee proposition and Trump’s floated joint venture with Iran in April. None of them has lasted more than a few days.
Trump has warned of striking Iranian power plants and bridges repeatedly since January, usually as a deadline that passed without full follow-through. This time it was carried out: on 17 July, US strikes hit six bridges in Hormozgan province, killing at least seven people and wounding twenty, on the roads connecting to Bandar Abbas – the IRGC naval base city, and the key target for any US ground operations, as argued in April, as opposed to Kharg Island itself. A maritime control tower at Chabahar, further along the Gulf of Oman coast, was destroyed the same night. Kharg seizure talk has also returned, although now with Trump suggesting the ground campaign might fall to “other people” rather than American troops. Reporting has rightly been pushing back, noting that holding the island would likely require a far larger force than currently assembled, regardless of who provides the troops.
The crude price continues to be the part of my forecast that has not yet matched my calculations. Yet, Brent has now fully round-tripped the entire post-MOU relief rally – from $76 on 10 July to $88 by the 17th, up around 16% for the week – and the market mechanics underpinning the increase look closer to the ones I have previously described rather than just a passing scare. Prompt Brent flipped from contango into nearly $2.50 a barrel of backwardation mid-week, a clear signal of immediate physical tightness rather than an insurance cost specifically. Refined product cracks have moved further still, with diesel margins above $85 a barrel and gasoline margins around $55, both back toward the extremes reached earlier in the crisis. Barclays’ research desk described much the same picture in less colourful language this week: SPR releases have shielded the crude market, but commercial inventories “do not look comfortable”, and the bank is holding its $96 full-year forecast for 2026 regardless of where spot sits today. The SPR is down almost 99 million barrels since the war began, to 316.5 million, and Cushing stocks remain close to the operational floor tested earlier in the year.
What has kept price below the earlier calculations is not that the assessment was wrong, but that the offsets have proven larger or slower to unwind than modelled. Chinese imports have been running well below their five-year average since April and fell to around 40% of pre-war levels in June, but whether and how far they recover remains an ongoing uncertainty – so one of the largest cushions still in place is one whose timing nobody can currently predict. At the same time, Iraq has been building additional bypass routes, trucking fuel oil primarily through Syria to Baniyas and smaller volumes through Jordan to Aqaba – workarounds rather than durable pipeline capacity, though the Baniyas trade alone was large enough to make Syria the Middle East’s largest exporter of high-sulphur fuel oil in June. More permanent pipeline expansion is being accelerated across the Gulf states generally, though most of that capacity is still years from having a significant impact.
My assessment and forecasts have framed the whole period as a race between reserves and restoration – whether the strait would return to normal before the temporary buffers ran out. That race is not yet over, given Chinese and US reserves still hold, but it looks increasingly likely Hormuz will lose. Transit hasn’t normalised – it has collapsed again and worse in places than before the MOU. What steps in as a substitute to chase the reserve runout early lead is how fast bypass routes – Iraq’s trucking workarounds and the wider Gulf pipeline build-out – can scale to cover what the strait no longer reliably carries. Whether the forecast turns out to be early rather than wrong depends on which of those two finishes first, but on current form it is difficult to see the new entrant close the gap in time.