US offers Iran $6 billion for Hormuz opening as traffic halves

The Trump administration offered to unfreeze $6 billion in Iranian assets held in Qatar in exchange for Tehran abandoning plans to charge tolls on ships passing through the Strait of Hormuz, but Iran's military responded with fresh threats against vessels that fail to use its approved routes.

"Iran is trying to open the strait on its own terms and does not want to relinquish what leverage it has gained," said Sanam Vakil, director of the Middle East and North Africa program at Chatham House, a London think tank. "Tehran can disrupt the strait more easily than it can sustainably administer it."

Daily traffic through the waterway fell to 43 vessels by Wednesday from 75 a week earlier, according to Kpler, a commodities-data provider. Before the war, more than 100 ships a day passed through the strait, which carries about a fifth of the world's oil supply. Iran wants to charge fees for every vessel crossing, potentially generating as much as $40 billion a year, according to Iranian estimates.

The deadlock threatens to keep global oil markets on edge, with the risk of renewed attacks on shipping if talks collapse. The 60-day memorandum of understanding signed last month expires Aug. 18, giving both sides limited time to reach a broader agreement. Negotiators are expected to resume indirect talks in Doha after the funeral of Iran's late Supreme Leader Ayatollah Ali Khamenei, scheduled for burial July 9.

Iran's leverage and the $100 billion question

Iran has about $100 billion in assets frozen overseas, the result of years of US sanctions. Talks had initially been progressing toward the release of $6 billion held in Qatar, but Iran's decision to block the strait set back the release, people familiar with the discussions said. US envoys Steve Witkoff and Jared Kushner traveled to Doha this week to meet with Qatari mediators about how to break the impasse.

Upon returning from Doha, Iran's negotiator, Deputy Foreign Minister Kazem Gharibabadi, insisted the strait is "under Iran's command," not the US's. Tehran's military later warned that any ship not passing through an Iran-approved route would face an "immediate and powerful" response. The warning came as Iran prepares for the funeral of Khamenei, who was killed in the war's opening moments in February.

Oman's alternative proposal faces hurdles

Oman, which occupies the southern side of the strait, has circulated an alternative proposal under which maritime services would be paid through a fund financed by voluntary donations from oil and shipping companies, according to officials familiar with the talks. The proposal draws inspiration from the Straits of Malacca and Singapore, where voluntary industry contributions help finance navigation safety programs.

Iran has objected to the formula because no fees would be paid directly to Tehran. Gulf nations are doubtful the plan would work because Iran lacks sufficient equipment to properly manage the waterway, the officials said. US negotiators received the proposal but had concerns it could still be seen as a form of toll booth benefiting Iran.

The last time Iran disrupted shipping through the strait during the opening weeks of the conflict, oil prices spiked sharply and maritime traffic ground to a halt before a ceasefire restored partial stability. A renewed breakdown in talks could trigger a similar reaction in crude markets, with Brent and WTI benchmarks already pricing in a geopolitical risk premium. Pakistan, which has been mediating between the sides, said Wednesday's talks saw "positive progress" and expressed hope the next round would be scheduled after Khamenei's funeral.

The US has warned Iran that its demand for tolls could derail the broader peace deal, with American officials telling Tehran to "think bigger" about the economic benefits of sanctions relief versus the revenue from strait tolls. Unrestricted oil exports and better trading opportunities would earn Iran far more than any plan to collect passage fees, a US official told Axios.

This article is for informational purposes only and does not constitute investment advice.