A proposed agreement aimed at ending five months of war between Iran and the United States would hand Tehran authority over ships entering the Persian Gulf through the Strait of Hormuz, according to Reuters — marking one of the most significant concessions to Iran to emerge from the conflict.

The Strait of Hormuz, the narrow waterway connecting the Gulf to the open ocean, sits at the heart of global energy trade as the primary transit route for oil and gas exports from Gulf producers. Roughly 20% of the world's daily oil supply passes through the strait, making it the most consequential maritime chokepoint in the global energy system. Before the war, it was freely open to all shipping with no fees charged under the long-standing principle of transit passage through international straits. Control over who inspects, charges fees to, or governs vessels passing through has never been merely a logistical matter; it is effectively control over a critical artery of the world economy.

According to a senior Iranian source and two regional officials who spoke to Reuters, the text of an agreement under discussion between Iran and Oman — the two countries controlling the strait's northern and southern channels respectively — would grant Iran authority over vessels heading into the Gulf.

Iranian Deputy Foreign Minister Kazem Gharibabadi told state news agency IRNA that talks with Oman had reached "fundamental understandings" and that the arrangement was designed so commercial ships would pass through Iranian territorial waters on both inbound and outbound legs, adding that progress was "on the verge of being finalised."

That framing sits uneasily with the stated US position. Washington has repeatedly said it would never agree to Iran controlling access to the strait, and there was no immediate American comment on the proposal reported by Reuters. It also marks a departure from decades of US policy aimed at keeping the strait open under international maritime law, under which all states enjoy the right of unimpeded transit passage through straits used for international navigation.

President Trump has publicly described a deal as imminent, but regional and Iranian sources cautioned that significant details remain unresolved and pushed back on the idea that an agreement was close. One regional source told Reuters that a concession over some form of Iranian control had already effectively been made, but that the precise definition of that control was still being negotiated — including whether regional countries would supervise ship inspections and whether any fees would be voluntary.

Money remains one of the more concrete sticking points. The senior Iranian source said Tehran is seeking fees of between 5% and 7% of the value of cargoes carried by ships using the strait, while Oman is understood to be discussing a lower rate of around 3%. Washington wants no fees charged at all — a gap illustrating how far apart the parties remain even amid reported progress.

The stakes extend well beyond shipping economics. An agreement granting Iran meaningful authority over the strait would represent a marked shift in the regional balance of power in Tehran's favour, given that the war was launched by the United States and Israel at the end of February. Gulf states such as Saudi Arabia, the UAE, Kuwait, and Qatar — all dependent on the strait to export the bulk of their oil and gas — would find their primary export route subject to a rival's discretion for the first time. Iran has reported more than 3,400 deaths since the conflict began, against 18 US military personnel killed. Tehran has continued striking US allies in the region with missiles and drones while also targeting commercial vessels transiting the strait without its permission. Iran has separately warned Gulf states that any renewed US attack on Iranian territory would trigger retaliation against regional energy infrastructure, a warning one Gulf source described to Reuters as unequivocal.

Political pressure adds another dimension to why a deal — even an imperfect one — may be attractive to Washington. Trump, who at the start of the war called for Iran's unconditional surrender, faces pressure ahead of November's midterm elections from American voters who oppose the conflict by a two-to-one margin. Reuters reported that US commanders advised Trump in July that munitions stocks were running low, with the Army said to have used up nearly all of its long-range precision missiles following a two-week campaign of strikes that failed to break Iran's grip on the strait. Speaking at a rally in Las Vegas, Trump said he would rather reach a deal than continue fighting, telling supporters: "I'd rather make a deal because I don't want to kill people."

Any deal perceived to hand Iran meaningful control over shipping through the strait would likely be read by oil markets as a mixed signal — easing immediate war risk while introducing a new and less familiar risk around fees and access terms for tankers moving through the waterway. Reports that regional sources are pushing back on Trump's claim of an imminent deal suggest markets should treat the reopening narrative with caution rather than pricing in resolution. The prospect of Iran collecting fees of 5 to 7% on cargo values, well above the roughly 3% Oman is said to be discussing, could add a persistent cost layer to Gulf shipping even once hostilities ease.

Crude prices have fallen over the past two days after Trump called off renewed strikes on Iran, citing ongoing talks. Whether that de-escalation holds, and on what terms, may ultimately come down to whether Washington is prepared to accept a version of Iranian control over Hormuz that it has spent months publicly ruling out.

Source: ForexLive / InvestingLive