A single social media post from former President Trump sent shockwaves through global energy markets.
The post claimed Iran had agreed to “never close the Strait of Hormuz again,” signaling an abrupt de-escalation. In response, oil prices plummeted more than 10%, and risk assets rallied. However, the reality is more nuanced. While Iran’s foreign minister confirmed the strait was “completely open,” the U.S. simultaneously stated its blockade on Iranian ships and ports would remain. This specific combination led markets to price in the certainty of transit for non-Iranian cargo, removing a significant risk premium from oil prices, while keeping Iranian supply constrained. This explains the dual market reaction: oil prices fell sharply, but tanker equities rose on the expectation of increased shipping volumes.
This sudden de-escalation didn't happen in a vacuum. It was the culmination of months of escalating tensions. Let's trace the key causal steps.
First, the immediate catalysts in the preceding four weeks set the stage. A provisional, two-week ceasefire mediated by Pakistan included the conditional reopening of Hormuz. This was followed by Trump's hint that the strait would reopen “soon,” priming the market for good news. The tension peaked when Qatari LNG carriers attempted to transit but were forced to turn back, proving the strait was effectively closed and making an official reopening a major event.
Second, the actions from five to eight weeks prior created the high-stakes environment. U.S. strikes on Iran’s Kharg Island and retaliatory strikes on Saudi facilities demonstrated the fragility of the situation. In response to the supply crisis, the International Energy Agency (IEA) announced a record 400-million-barrel emergency stock release, signaling that the closure was unsustainable and a diplomatic resolution was necessary.
Finally, the pattern of tit-for-tat seizures of oil tankers by both the U.S. and Iran over the previous year established the precedent for using maritime control as leverage. Iran's move to a “toll-booth” regime, effectively strangling 90% of traffic, was the final step that pushed the crisis to a breaking point, making today’s negotiated retreat almost inevitable.
- Risk Premium: Additional return an investor expects for holding a risky asset, compared to a risk-free one. In oil, it reflects fears of supply disruptions from geopolitical events.
- Strait of Hormuz: A narrow waterway linking the Persian Gulf with the Gulf of Oman and the open ocean. About a fifth of the world's oil consumption passes through it, making it a critical chokepoint.
- LNG (Liquefied Natural Gas): Natural gas that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport.