Iran closes Strait of Hormuz, ship crossings plummet over 50%

The Strait of Hormuz has experienced a significant drop in ship activity, with crossings down by more than half over the past few days. This decline comes amid increased tensions between Iran and the United States, following the collapse of a US-Iran memorandum of understanding and subsequent military actions. Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy declared the strait closed as of July 12, enforcing the use of Iran-preferred maritime routes, while activity in the Omani corridor has notably decreased. These developments have significant implications for global oil markets, with prices surging above $90 per barrel.

In the prediction markets, the likelihood of fewer than 150 ships transiting the Strait of Hormuz between July 6 and July 12 is currently priced at 77% YES, reflecting a significant shift from earlier expectations. The market had previously seen a decline from an 84% YES probability 24 hours ago, indicating fluctuating participant sentiment. This situation suggests a heightened perception of risk in the region, consistent with scenarios where the strait remains a focal point of geopolitical tensions.

The strait’s closure has led to a re-routing of maritime traffic, with Iran successfully diverting ships to its controlled corridors. This strategic move underscores Iran’s assertion of exclusive routing authority in the region, complicating the diplomatic landscape and potentially prolonging the conflict.

Key Takeaways

• Market pricing suggests an increased likelihood of fewer than 150 ships transiting the Strait of Hormuz, now at 77% YES.
• The decline in ship activity is consistent with Iran’s enforcement of controlled maritime routes, impacting global oil prices.
• Recent geopolitical developments appear to have heightened perceived risks in the region, influencing market dynamics.

What to Watch

Observers should monitor any further military or diplomatic actions involving the US and Iran, as these could impact market perceptions and the strait’s operational status. Key developments include potential US responses, IRGC activity, and any diplomatic negotiations. A shift towards reopening the strait or easing tensions could alter market expectations and reduce current pricing support for the YES outcome.

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Disclosure: This article was edited by Estefano Gomez. For more information on how we create and review content, see our Editorial Policy.