Iran demands ship permits for Hormuz Strait, threatening 20% of global oil

Iran said all ships transiting the Strait of Hormuz must obtain Iranian permission and purchase mandatory insurance, a move that threatens to disrupt the waterway handling about 20% of global oil and liquefied natural gas shipments.

"We're also honoring our end of the early part of the agreement on the military side," Vice President JD Vance said Thursday, noting more than 12.5 million barrels of oil passed through the strait on Wednesday night alone as evidence the deal was already producing results.

The announcement came days after Washington and Tehran signed the Islamabad Memorandum of Understanding, a 14-point framework that ended more than three months of hostilities and lifted the US naval blockade on Iranian ports. Under the IMOU, the US agreed to cease blockade enforcement while Iran committed to restoring shipping activity. US Central Command confirmed Thursday that all enforcement operations had ceased, and vessels that had been stranded began moving through the strait for the first time in more than 100 days.

The new insurance requirement — currently free but subject to future fees — introduces fresh uncertainty for shipping companies, insurers and energy traders who had begun restoring normal operations. War-risk premiums that surged during the conflict may remain elevated as the market assesses whether Iran's demand is consistent with the IMOU's freedom-of-navigation guarantees.

A Fragile Reopening

The Strait of Hormuz had been effectively closed to Iranian-bound traffic since April, when President Donald Trump imposed a naval blockade after diplomatic talks collapsed. The disruption sent global oil prices surging and pushed US gasoline prices above $4 a gallon. More than 100 days of restricted transit stranded vessels and forced shipping companies to reroute cargoes at significantly higher costs.

The IMOU's signing at Versailles, attended by Trump and French President Emmanuel Macron, was hailed as a major diplomatic breakthrough. G7 leaders welcomed the deal as a "historic opportunity." Oil prices fell sharply on the news, with Brent crude dropping as the market priced in restored supply routes.

What's at Stake for Energy Markets

Iran's new stipulation creates legal ambiguity that could slow the recovery in shipping activity. While the IMOU guarantees freedom of navigation, Iran's demand for permission and insurance introduces a parallel requirement not explicitly addressed in the 14-point framework. Shipping companies and their insurers must now determine whether Iranian-issued permits satisfy international maritime law and whether the mandatory insurance — potentially priced above market rates — adds a cost layer that makes Iranian crude uneconomical.

The last time Iran imposed similar navigation restrictions during the 2019 tanker seizures, maritime insurance premiums for Gulf transits tripled within weeks, and several major shipping lines suspended Iranian port calls entirely.

For oil markets, the stakes are clear. The Strait of Hormuz handles roughly 20 million barrels of crude and petroleum products daily. Any disruption to the reopening process could reverse the recent price declines and reintroduce the geopolitical risk premium that had pushed Brent above $90 a barrel during the blockade. Safe-haven assets including gold and the US dollar could also attract bids if shipping restrictions tighten again, mirroring the pattern seen after the initial blockade in April.

This article is for informational purposes only and does not constitute investment advice.