Oil Prices Rise as Iran Draft Plan Proposes Strait of Hormuz Bans

Strait of Hormuz Transit Restrictions and Fee Proposals

Oil prices resumed their upward trajectory on Friday, driven by mounting anxieties regarding the reopening plans for the critical waterway. According to an apparent draft plan published by Iran, the country would ban U.S. and Israeli ships from transiting the Strait of Hormuz. Furthermore, the draft stipulates that other nations deemed to have harmed Iran would remain barred from transit until compensation is paid.

An Iranian lawmaker confirmed that a parliamentary committee is reviewing a preliminary bill to enforce these bans against U.S., Israeli, and other vessels categorized as hostile. In addition to transit bans, discussions over fee structures have created friction among regional actors. A senior Iranian official reported that Tehran seeks fees between 5% and 7% of cargo prices for ships utilizing the strait. Meanwhile, Oman has discussed fees of approximately 3%, whereas Washington maintains that no fees should be levied at all.

Market Reactions and Conflicting Diplomatic Accounts

The threat to maritime trade routes sent immediate ripples through global energy markets. Prior to Thursday, oil prices had experienced downward pressure as hopes for a diplomatic solution to the conflict grew, pushing benchmark Brent below $80 for the first time since July 13. However, Brent breached the $80 threshold on Thursday, settling up by over $3 a barrel.

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Market analysts remain deeply skeptical about the viability of any near-term transit pact. Markets have already seen at least ​one short-lived arrangement earlier this year, so confidence that a new pact would ​fully restore normal tanker movements remains low, said Tim Waterer, chief market analyst at KCM Trade, emphasizing that lingering market skepticism has put a firm floor under prices.

“Higher oil prices signaled that a further inflationary impulse from energy and the situation in the Middle East could not be discounted, sending US dollar higher and government bonds lower.”

Westpac, market note

Diplomatic efforts are further complicated by conflicting statements from Washington and Tehran. While U.S. President Donald Trump told reporters in the Oval Office that the war in Iran would end pretty soon, leadership in Tehran sharply dismissed his remarks, accusing him of staging theater diplomacy.

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Overlapping Supply Pressures in Russia and Saudi Arabia

Beyond the geopolitical standoff in the Strait of Hormuz—a crucial maritime corridor where roughly a fifth of the world’s oil and liquefied natural gas transited before the conflict began at the end of February—other major supply disruptions are compounding market anxieties. Financial analysts pointed to parallel shocks affecting international petroleum flows.

Adding to supply concerns, Ukraine struck two of Russia's major oil refineries overnight (Yaroslavl/Yanos and Bashneft's Novoil facility), and US imports of Saudi crude dropped to zero in July for the first time since 1985, according to a research note published by UOB.

Compounding these tensions on Thursday, Yemen’s Houthis announced that they carried out targeted missile and drone operations against Saudi ​deployments in the Marib and Hadramout regions of Yemen.

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Implementation Hurdles Facing Proposed Transit Pacts

While media reports indicate that Iran and Oman are actively working on an agreement to define specific transit lanes—suggesting inbound traffic would utilize Iranian waters while outbound traffic would navigate through Omani waters—industry experts warn that significant obstacles remain. Four separate industry sources noted that the proposed framework is not easily workable in practice due to ongoing U.S. sanctions and restrictive insurance clauses governing any international payments. As analysts observe, diplomatic exchanges have merely raised hopes rather than securing a finalized, operational agreement.