Crude oil prices rose following the publication of a draft plan by Iranian state news outlining restrictive conditions for ship traffic in the Strait of Hormuz, according to CNBC. Brent crude, the international benchmark, rose about 4% to $82.72 per barrel, while U.S. West Texas Intermediate increased about 3.5% to $77.83 per barrel. Prices had previously fallen about 8% during the week after President Donald Trump, Treasury Secretary Scott Bessent, and Secretary of State Marco Rubio stated that a deal was near to increase traffic through the strait.
Oil Prices Rise Following Publication of Iranian Draft Plan for Strait of Hormuz
The Iranian state news agency Fars published the text of what it described as an initial draft of the strategic plan for managing the Strait of Hormuz. Under the draft plan, Iran would ban U.S. and Israeli ships from transiting the waterway. Additionally, other nations that have harmed Iran would be barred from transiting until compensation is paid, and Tehran would impose penalties on violators equivalent to 20% of the value of cargo aboard a ship. The plan is currently under review by an Iranian parliamentary committee, according to Fars.
Strait Closure and Alternative Pipeline Projects
The effective shutdown of the Strait of Hormuz, where roughly 15 million barrels of Persian Gulf oil were shipped each day before the war, has driven up fuel prices and roiled the global economy, according to cbsnews.com. Brent Crude surged to over $100 per barrel on Thursday. In response to the disruption, countries across the Gulf are planning to spend billions of dollars building pipelines to redirect supplies to ports along the Red Sea and the Gulf of Oman, with at least seven major pipeline projects under construction, in the planning stage, or being discussed.
Analysts at the investment bank Goldman Sachs noted that the new projects to bypass Hormuz could carry an added 3.8 million barrels of oil a day by the end of next year, and 7.3 million barrels per day by the end of 2028. These projects would enable roughly 60% of the Gulf’s total prewar exports of 23 million barrels a day to bypass Hormuz if needed. Victoria Grabenwöger, a senior research analyst at data firm Kpler, stated that producers have realized relying so heavily on the Strait of Hormuz is no longer a prudent long-term strategy.
Negotiations, Regional Conflict, and Shipping Incidents
Prior to the publication of the draft plan, Iran stated it was in the final stage of drafting an agreement with Oman over the Strait of Hormuz, with President Trump indicating a deal could be announced during the week, according to apnews.com. However, the potential agreement faced contingencies regarding the U.S. lifting its blockade on Iran’s ports, and regional officials reported that the draft awaited final approval from Iran’s Supreme Leader Ayatollah Mojtaba Khamenei.
The conflict has continued to impact regional shipping and security. A tanker reported hearing two explosions off the coast of Oman while transiting Hormuz, according to an incident report from the United Kingdom Maritime Trade Operations Centre, though the crew and vessel were safe. Meanwhile, Yemen’s Houthi rebels claimed to have attacked Saudi Arabian troop concentrations and targeted Saudi oil tankers in the Red Sea.
