Strait of Hormuz Crisis: A Comprehensive Overview

The conflict between the US, its allies, and Iran—which began on February 28 with US and Israeli attacks against Iran—has centered on control of the Strait of Hormuz, a waterway through which approximately 20% of the world's oil and liquefied natural gas transits. The situation has been marked by military escalations, diplomatic efforts, threats from both sides, and significant volatility in global oil prices.

Military Actions and Closures

The Strait of Hormuz has been effectively closed to most commercial traffic since the start of hostilities, with Iran controlling passage.

Reports indicate Iran has targeted ships perceived to be linked to the US and Israel while allowing some vessels from specific countries to pass.

Key military developments include:

• The US launched a new series of strikes on Iran on the 13th consecutive night of military action.
• Israel Defense Forces (IDF) initiated strikes on infrastructure in Tehran.
• The US accelerated the deployment of Marines and amphibious assault ships to the Middle East. An additional 3,500 US troops were reported arriving in the region.
• Iran-backed Houthi rebels have conducted attacks on shipping in the Red Sea.
• Iran continued operations including attacks on shipping and US bases and allies in the Middle East.
• Reports indicate casualties including American soldiers.

Ultimatums and Threats

President Trump issued a 48-hour deadline via Truth Social, stating that Iran must "fully open, without threat" the Strait of Hormuz.

He threatened to bomb Iranian power plants, beginning with the largest one, if the deadline was not met.

Iran responded with counter-threats:

• Iran's Parliament speaker Mohammad Bagher Ghalibaf stated that attacks on Iran's power plants would be met with immediate retaliatory strikes on energy and oil infrastructure across the region.
• Iran stated it would "completely" close the Strait of Hormuz if its power facilities were attacked.
• The Iranian military indicated it would target "all energy, information technology, and desalination infrastructure" linked to the US and Israel in the region.
• A senior Iranian official added that the headquarters and assets of financial entities buying US Treasury bonds are considered "legitimate targets."
• Tehran also threatened to close and mine the Gulf if a coastal invasion occurred.

Trump stated he was considering a "massive attack" on Iran, which he described as "bigger than ever before." He warned he may resume attacks if Iran does not agree to his terms.

Diplomatic Efforts

Despite the escalations, diplomatic channels have been active. Iran stated, via the semi-official Iranian Students' News Agency, that the latest US proposal has partly narrowed gaps between the two sides. The agency reported that Tehran is responding to a US text but that further narrowing requires an end to perceived war temptation from Washington.

Trump informed reporters in West Palm Beach, Florida, that Iran initiated contact seeking a diplomatic resolution. Discussions reportedly covered 15 points, including preventing Iran from acquiring nuclear weapons. Special envoy Steve Witkoff and Jared Kushner are reportedly leading these talks for the US.

On June 17, the US and Iran signed a Memorandum of Understanding setting a 60-day negotiation period on Iran's nuclear program and other measures to end the war.

The US and Iran met in Switzerland for talks, resulting in the US partially lifting sanctions on Iranian oil exports. Mediators Qatar and Pakistan stated the US and Iran established a communication line to ensure safe passage for commercial vessels.

Positions and Demands

• Trump stated the US wants the Strait open and free, without tolls.
• Trump said Iran had accepted most of a 15-point plan proposed by the US to end the conflict, though Iran has not publicly confirmed this.
• US demands include Iran handing over enriched uranium and committing to end enrichment for at least a decade.
• Iran's new Supreme Leader, Mojtaba Khamenei, issued a directive that Iran's near-weapons-grade uranium should not be sent abroad. He succeeded his father Ali, who was killed on the conflict's first day.
• Iranian President Masoud Pezeshkian stated Iran will never back down in talks.
• Iran maintains its nuclear program is for civilian purposes and denies seeking nuclear weapons.
• Secretary of State Marco Rubio said a proposed toll system for the Strait of Hormuz would make a deal with the US unfeasible.

Oil and Energy Market Impact

Oil prices have experienced significant fluctuation throughout the conflict.

• Prior to US and Israeli military actions against Iran on February 28, oil prices were approximately $70 per barrel.
• At one point, Brent crude futures rose to $126 per barrel before settling at $114.
• Brent crude later fell below $72.48 per barrel, the pre-conflict level, as traffic resumed through the Strait, before rising again.
• Following the 48-hour ultimatum, Brent crude traded near $112-$116 per barrel. US WTI crude traded near $98-$103 per barrel.
• The price difference between Brent and WTI exceeded $14 a barrel, representing the largest spread in several years.
• Goldman Sachs reported global oil stockpiles are being drawn down at a record pace.
• Goldman Sachs analysis cited three factors for relative stability at times: a lower risk premium, destocking, and moderation in spot buying.
• The International Energy Agency Executive Director Fatih Birol warned of a severe global energy crisis.

Fuel Prices

The US national average gasoline price has risen, approaching and at times exceeding $4 per gallon. The price reached an average of $3.98 per gallon on Sunday, the highest level since summer 2022.

• California retail gasoline exceeded $6 per gallon at one point.
• Retail gas prices increased by 93 cents per gallon from pre-conflict levels.
• Gasoline analyst Patrick De Haan estimated US drivers collectively spent an additional $10 billion on gasoline since the conflict began.

Trump ordered an investigation into major energy companies, accusing them of not reducing fuel prices despite lower oil costs. The American Petroleum Institute stated fuel prices do not move in lockstep with crude oil. The UK competition watchdog found no widespread evidence of unfair petrol price hikes.

Strait of Hormuz Traffic and Status

Following the June 17 Memorandum of Understanding and subsequent talks:

• The number of vessels crossing the Strait increased significantly.
• Maritime intelligence firm Kpler reported a rise in ships carrying crude oil, LNG, fertilizer, and other goods.
• Marisks estimated around 80 ships crossed the strait since Monday after the first round of peace talks, using a northern passageway with Iranian permission and a southern route cleared of mines with US Navy guidance.
• Traffic remains below pre-war levels of over 100 ships per day; hundreds of ships are still waiting in the Gulf.
• Trump stated that 20 boatloads of oil, in addition to 10 from the previous week, would pass through the Strait starting Monday as a "sign of respect."

Broader Economic and Political Effects

The conflict has contributed to increases in prices of grocery items, jet fuel (reaching $195 by the end of March), helium, pharmaceuticals, and fertilizer.

• Some airlines implemented additional charges for travelers or canceled flights.
• The three major US stock indexes experienced declines in advanced trades, with Asia-Pacific markets in Japan and South Korea falling over 5%.
• The economic situation presents political challenges for President Trump domestically ahead of upcoming midterm elections.

Statements from Officials

Treasury Secretary Scott Bessent, questioned on NBC News' "Meet the Press," stated that scaling back and escalating were "not mutually exclusive," adding that "Sometimes you have to escalate to de-escalate." He declined to provide details on potential US military actions, including using troops to secure the Strait of Hormuz, and warned that "all options" remained available to secure Kharg Island.

Bloomberg Economics analysts Becca Wasser and Chris Kennedy said, "Trump wants to end the Iran war, but not on the terms proposed by Tehran."