Iran and Oman pursue transit deal as insurers raise Hormuz passage costs

The price of crossing the Strait of Hormuz was quoted this week at 7.5 to 12.5 percent of a ship's hull value for war-risk cover alone, and, according to Ajel English on August 19 citing marine insurance market sources, the toll is now so steep many owners are simply staying home.

Iran and Oman say they are close to a deal on a supervised corridor with transit fees attached. Yet Iranian Foreign Minister Abbas Araghchi insists that the talks have nothing to do with reopening the waterway at all, as the Associated Press reported on August 17. The underwriters are no longer waiting for the diplomats to agree on what the talks mean. A treaty that nobody has signed is being overtaken by a price list that is already published.

The stakes are a corridor that pays Tehran and a waterway that still will not carry cargo. Tehran is looking for money and recognition: fees on every hull, a veto over who passes, and bargaining power to trade against Washington after the US and Israeli war and the naval blockade squeezed its ports shut. Oman wants to be the indispensable neighbor again, collecting rent as the honest broker, as Muscat has done since the hostage era.

The Trump administration seeks passage restored without paying Iran for it. The Associated Press documented on August 17 that it leaned on Oman publicly, threatening the sultanate directly as the deal neared completion. The shipowners want none of the above—they just want their underwriters to pick up the phone.

Missiles triggered the latest halt. After rockets launched from Iranian territory landed toward the Emirates, Abu Dhabi announced an immediate stop to all trade, commercial, and financial dealings with Iran, cutting off its second-largest trading partner overnight, according to the Institute for the Study of War on August 19 and the New York Times on August 20. That bilateral trade reached roughly $28 billion a year by WTO count for 2024, mostly re-exported goods, food, and electronics flowing through Dubai’s ports into Iran, as the New York Times detailed on August 20.

The slower pressure is older. Iran has spent four decades claiming the right to charge for passage, and this crisis is its best chance yet to collect.

The ships tell the truth

On Thursday, only one oil tanker made the transit—the lowest daily count since May 7—and Brent crude climbed back above $100 a barrel on the same trade, reported OilPrice.com on August 21.

Kpler’s AIS tracking shows Iranian crude exports are down to 156,000 barrels per day, more than eighty percent below any normal level. That means the country claiming ownership of the strait cannot sell its own oil through it, according to the Ronin Global Strategies OSINT summary for the week of August 15-21.

Al Jazeera’s analysis, published August 20, found that most vessels now mask their identities when passing through. Captains fear Iran’s Revolutionary Guard more than the US Navy.

The premium won every time

The historical parallel is the Tanker War of the 1980s, when Iraq and Iran attacked shipping and Kuwait’s tankers sailed under American flags because no commercial insurer would cover them. Then as now, the chokepoint stayed legally open while commercially dead: the law promised free transit, but the insurance premium dictated reality, and the premium always won. The scale, however, is different now. Forty years ago, two regional powers were exhausting each other; now, one side of the water is the world’s largest exporter of liquefied gas and the other runs a nuclear program under rubble, so the ceiling on escalation is much higher.

The counter-case points to patience. In 2019, after mines damaged tankers near Fujairah and Iran seized the Stena Impero, war-risk premiums spiked then quickly fell back within weeks as long as no new attacks occurred. Owners grumbled, paid, and continued to sail. If you believed that pattern, you would be buying tanker exposure now, betting that 2026 will repeat 2019 and the premium will return to normal with a new deal. The difference is that in 2019 there was no closure, no blockade, and no Gulf state cut trade to zero. That spike assumed the old baseline would return.

First, the Asian refiners pay. China’s teapot refineries and India’s state buyers lose access to discounted Iranian barrels and begin bidding up West African and Brazilian grades, raising freight rates on all long-haul routes. Second, Gulf exporters reroute, and the pipelines show how much detour capacity exists: Saudi Arabia’s East-West line to Yanbu can carry some of the displaced volume, but not all—which is why prices rose before pipelines filled.

Third, the winners cash out quietly. Owners of modern VLCCs outside the Gulf command extraordinary day rates precisely because ships trapped inside the strait cannot compete, and the London syndicates writing cover at 12.5 percent of hull value per transit earn more in a week of Hormuz risk than in a year of quiet oceans, as Ajel English reported on August 19.

Last, the consumer pays. Higher crude flows into higher fuel prices, fertilizer costs, and airline fares within a quarter, and none of the main negotiating parties has an incentive to end an arrangement that pays them. Iran receives fees if the deal is signed, underwriters collect premiums if it is not, and the consumer receives neither fee nor premium, just the invoice.

The evidence supports an uncomfortable conclusion. The insurance market has already written the outcome that diplomats are still negotiating. A corridor agreement that Abbas Araghchi explicitly separates from reopening the waterway means nothing for a shipowner whose Lloyd’s syndicate quotes double-digit percentage premiums per transit, as the New Indian Express observed on August 16. Unless the premium falls, the strait remains closed in every way that matters for commerce.

The Joint War Committee’s listed areas and the quoted additional-premium percentages are the signals to watch, not the press conferences from Muscat or Tehran. The number is the news.