Back to the drafting board on the Strait of Hormuz

So much for the great “reopening”, eh?

It seemed like both sides would try to at least close one eye on hostilities to play to the optics of a deal. But alas, that didn’t even last two weeks. And with that, Iran is back to placing the Strait of Hormuz in de facto closure.

However, was this part of their plan all along? Perhaps so.

But then again, one would think that they would have wanted to bait the US for a bit longer and drag out any negotiations for a bit more before feigning innocence in an excuse to halt talks. Whatever the case, it is what is now.

The US and Iran are back to launching attacks against one another with no signs of any further negotiations. And as that plays out, the Strait of Hormuz is now more or less closed for business again.

After roughly seeing traffic of around 30-40 vessels transit through the strait in recent weeks, that figure has dropped dramatically since Friday.

• 10 July: ~10 to 12 vessels crossed (lowest since 28 June)
• 11 July: ~10 to 14 vessels crossed
• 12 July: ~6 vessels crossed (lowest in five weeks)

As such, energy flows were basically stagnant with Bloomberg also noting that there was “almost no visible traffic” on commercial tracking systems. It is pretty much back to the drawing board as both sides are going on the offensive against each other again.

Even if playing to the optics of a deal, there was hope of some short-term relief before reality comes knocking some time later. It seems like we are skipping all that as markets now need to deal with the plausible scenario that this on again, off again status with regards to the Strait of Hormuz may yet persist for many more weeks/months at least.

And in that case, consumers and businesses will feel the pinch much more quickly. In turn, traders and investors will also likely need to reach the point of realisation that the oil market “depleting its savings” to keep up in appearances is not necessarily a good thing. That especially if nothing is going to materially change with regards to how things are with the Strait of Hormuz.