Traffic through the Strait of Hormuz is up, as more oil tankers move in and out of the narrow waterway following the start of a new 60-day agreement between the U.S. and Iran.
Maritime data company Kpler tracked 71 confirmed vessels that crossed the Strait from Friday through Sunday. As of mid-Tuesday, at least nine fuel tankers have crossed the Strait of Hormuz, according to a Straight Arrow analysis of marine traffic data. It is unclear how many more ships are turning off their identifying radars to avoid detection as they pass through the strait.
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For drivers in the U.S., the price of gasoline has been up and down with the events of the war, peaking in May at more than $4.50 for a gallon of regular. The national average at the start of Tuesday is down to $3.93, according to AAA. The outcome of the next phase of negotiations can determine what Americans pay at the pumps, and numerous questions still hang over the global oil market.
“Volumes remain below pre-crisis norms and caution is still clear,” Kpler posted to social media Monday. “The reopening is delivering a recovery, though likely an uneven one.”
Status of the Strait
The rebound in tanker traffic comes amid mixed messages about whether the Strait is open. The memorandum of understanding states that Iran will take steps to restore pre-war vessel movement within 30 days.
Following Israeli attacks in Lebanon on Friday, Iran announced that the Strait was closed. By Monday, Vice President JD Vance declared it open. The U.S. and Iran have now reportedly agreed to coordinate safe passage of ships through a hotline to avoid miscommunication.
With the Strait’s status in a back-and-forth, analysts cited by maritime intelligence publication Lloyd’s List have nicknamed the waterway “Schrödinger’s Strait” — a reference to Austrian theoretical physicist Erwin Schrödinger whose thought experiment on quantum mechanics involved a cat said to be both dead and alive.
Questions remain around whether ships will have to pay extra fees to transit the Strait, or how long it will take to remove any mines that were laid over recent months. But unlike the height of global market disruption, oil is moving out of the Persian Gulf.
“We are on a positive trajectory,” said Skip York, a nonresident fellow focused on global oil at Rice University’s Baker Center for Public Policy. “Traffic is returning faster than people anticipated.”
How will U.S. gas prices be affected?
York told Straight Arrow that so long as the negotiations continue to progress, oil markets should bounce back from being undersupplied by 7 or 8 million barrels per day to being oversupplied by the fall. That will result in oil prices falling back closer to $60 per barrel, York said.
Before the war started, oil prices hovered around $60 per barrel, and U.S. consumers paid an average of about $3 per gallon of gasoline.
As the 60-day ceasefire plays out, York said he expects gas prices to continue dropping to reflect an oil price in the mid-to-low $70 range. But gas prices always fall slower than they rise due to a lag in the supply chain; gas stations typically cycle through stored fuel that they purchased at higher prices.
A full return to pre-war flows could take time. And the risk calculus for transiting the Strait of Hormuz is likely altered forever. York said he expects countries in the Persian Gulf with the ability to export oil via pipeline to continue expanding those alternate channels.
“We’re going to see trade routes modify or morph themselves again just like with Russia and Ukraine,” York said.
For American consumers, the remaining risk comes from further disruption, and the fact that the U.S. Strategic Petroleum Reserve is at its lowest level since 1983. If another crisis comes, whether it’s a geopolitical storm or a hurricane that knocks out oil refining capacity in Texas and Louisiana, the U.S. will have fewer resources to fill supply gaps.
“We’re at a low enough level that we don’t have enough bullets left in the chamber,” York said.
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