Iran has come out with a statement that the US has failed to live up to their end of the bargain. And as such, the Iranian military has moved to “close” the Strait of Hormuz once again.
Iran is claiming that the US “did not fulfill their obligations” as the naval blockade is still ongoing. In response, Iran now says that the strait is returning to “strict control” and any vessels wishing to transit will require Iran’s approval once again. In effect, that is a return to the previous status quo where the strait was in de facto closure. The statement reads:
“So long as the US does not ensure full freedom of navigation for vessels traveling from Iran to destinations and from destinations to Iran, the situation in the Strait of Hormuz will remain under strict control and in its previous state.”
Earlier in the day, shipping data has shown a modest pickup in terms of activity along the strait. However, Iran clearly did not proceed with any full “reopening” as there were many vessels still turned back when trying to transit. Meanwhile, there are also still many ships hanging around and loitering awaiting further clarification despite the good news from yesterday.
This was activity along the strait earlier this morning, about a few hours before the latest Iran announcement.
Despite the supposed “reopening”, there was still only a limited number of vessels and oil tankers that were permitted to pass through.
And now with the latest call by the Iranian military, I would imagine most vessels will be heading back to dock and everything returns back to near zero movement along the strait again.
It’s all just like a fever dream. The brief “reopening” only lasted less than a day and now we’re back to this.
At this point, Iran’s actions on the Strait of Hormuz are what matters most. It’s not so much about the political noise and messaging, especially from the US camp. Trump will always look to sell a victory and a positive statement but as mentioned many times last week, shipping data doesn’t lie.
Politicians can paint whatever narrative they want about the situation. But if there still isn’t any actual movement along the strait, global oil and gas supply will tighten further and physical prices will continue to squeeze higher.
Sure, your paper oil and futures might seem like the war is over. But if you step outside the house, you’ll notice everything and anything around you is going to experience price hikes in the near future – some of it has already begun.
And that’s going to be a big problem for many economies, that especially the longer this lasts.
This article was written by Justin Low at investinglive.com.