Strait of Hormuz reopening odds drop to 10% after Iran closure

Iran's military command closed the Strait of Hormuz to vessel traffic on Saturday, citing violations of a Lebanon ceasefire, halting a nascent recovery in crude flows through the waterway that carries about one-fifth of global oil supply.

"Iran announced the closure of the Strait, but it is not clear yet if that is more than rhetoric," said Daniel Shapiro, former U.S. ambassador to Israel and a senior fellow at the Atlantic Council. "Meanwhile, they are sending negotiators to Switzerland. That suggests they do not want to lose the benefits they are promised in this MOU."

Maritime intelligence firm Windward reported shipping stalled through the strait over the weekend, just days after an interim U.S.-Iran agreement had raised expectations that exports would normalize following nearly four months of disruption. U.S. Central Command said 55 merchant vessels carrying more than 17 million barrels of oil had transited the waterway in recent days. Brent crude settled near $80 a barrel on Friday after falling sharply earlier in the week on news of the interim deal.

The conflicting signals — Iran's foreign ministry initially said shipping was "operating normally" while Vice President JD Vance told Fox News the "straits really are open" — highlight the uncertainty facing oil markets. Prediction markets now price just a 10.5% probability that traffic normalizes through the Strait of Hormuz before June 30, according to Crypto Briefing data.

The closure declaration came from Iran's Khatam al-Anbiya Central Headquarters, the military's top joint command, and was reported by the semi-official Tasnim news agency, which is affiliated with the Islamic Revolutionary Guard Corps. The command described the move as a "first step" in response to what it called breaches of commitments by the U.S. and Israel, warning further measures would follow if aggression continued.

The announcement directly contradicted earlier statements from Iran's foreign ministry, which told Tasnim that shipping was operating normally. The split reflects a broader divide between Iran's diplomatic apparatus and its military hardliners, with Tasnim's affiliation to the IRGC suggesting the closure order may represent a harder line than the government's official position.

"I expect this to happen again and again over the next couple of days and weeks," said Martin Kelly, head of advisory at EOS Risk Group. "Iran is using its leverage over the Strait of Hormuz."

The interim agreement signed earlier this week had raised hopes that oil exports would gradually return to normal after nearly four months of disruption since the conflict known as Operation Epic Fury erupted in late February. Gulf producers had begun preparing to restore production, and some shipping activity had resumed along routes near both the Iranian and Omani coastlines.

However, portions of the central waterway are still believed to contain mines deployed during the conflict, and Iran had indicated earlier in the week that vessels transiting Hormuz would require government authorization, with new insurance requirements potentially being imposed. The uncertainty over shipping rules continues to cloud the recovery outlook.

Preparations for broader negotiations in Switzerland are moving ahead, with a delegation led by Parliament Speaker Mohammad Bagher Ghalibaf and Foreign Minister Abbas Araghchi traveling to the talks. U.S. officials said technical discussions are already underway. The outcome of those talks will determine whether the strait can return to normal operations or whether further disruptions lie ahead.

For oil markets, the stakes are clear. The last time Iran threatened to close the Strait of Hormuz during a period of heightened tensions in 2019, Brent crude spiked more than 15% within two weeks before diplomatic interventions stabilized the situation. With Brent near $80 a barrel, any sustained disruption could push prices sharply higher, potentially triggering emergency strategic petroleum reserve releases and renewed diplomatic interventions.

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