New Iranian Leader Sends a Hardline Message on Hormuz Deal

The war of words over the Strait of Hormuz continued Tuesday, with both sides attempting to control market perceptions of the state of play in the waterway.

The newly-appointed chief of Iran's Supreme National Security Council - the top decisionmaking body in Tehran - said Tuesday that Iran's preconditions for allowing more traffic through Hormuz remain largely unchanged, despite a weekslong U.S. blockade. In a statement at a formal meeting with China's ambassador, hardline Iranian security advisor Mohsen Rezaei said that "the Strait of Hormuz will not reopen until the US ends the war and blockade, releases Iran's frozen assets, and agrees to a region-wide ceasefire, including in Lebanon and Gaza . . . and other conditions that have been conveyed." He claimed that the strait will remain "closed" until the White House agrees to all Iranian demands.

The Gaza ceasefire condition could be a challenge, as it is not wholly within U.S. control: Israeli Prime Minister Benjamin Netanyahu has rejected the latest White House peace proposal for Gaza, and its prospects are uncertain.

Concerningly, Rezaei also separated the parallel Omani and American negotiating tracks, according to a readout provided by Tasnim. Representatives from the Iranian government have been attempting to reach a deal with their Omani counterparts on a mechanism for sharing control of the Strait of Hormuz, alongside a form of fee structure for marine traffic (a new cost opposed by international shipping and by the U.S.). Rezaei said that these talks are not connected to discussions with the United States.

"If an agreement is reached between Iran and Oman regarding the passage route in the Strait of Hormuz, this agreement will be separate from the issue of closing the Strait of Hormuz," said Rezaei.

Energy markets ticked upwards following Rezaei's comments. Later in the day, U.S. Energy Secretary Chris Wright issued a counter-claim, arguing that Iran's blockade of the strait is failing: he asserted that total crude oil shipments exiting the waterway were about twice the volume assessed by independent analysts.

"The seven-day average for oil leaving the Strait of Hormuz is currently up to almost 9 million barrels per day," asserted Wright.

Tanker tracking analysts are following vessel movements through the strait carefully, particularly in the southern corridor, where the UAE oil company Adnoc has been operating a shuttle system to and from the Fujairah anchorage. While this operation has significantly lifted throughput on the otherwise-closed strait - at a steep cost, including 15 attacks on Adnoc's fleet and counting - most analysts assess that the total volume is in the range of 4-6 mbpd, not 9 mbpd, said Bloomberg commodity analyst Javier Blas. The difference between Wright's assessment and independent assessments amounts to about four percent of global oil production, enough to move markets if accurate.

"A good bit of oil is still reaching the global markets. More expensively, and subject to Iranian strikes," said Obsidian Research's Brett Erickson. "[But] no evidence supports 9 mbpd."

Brent crude oil benchmark prices continued to rise after Secretary Wright's comments, reaching $89 per barrel by day's end. WTI rose to settle at about $84.