Following almost six weeks of fighting across the Middle East, U.S. President Donald Trump announced on April 7 that the U.S. and Iran had agreed to a 2-week ceasefire to allow ongoing peace negotiations to continue. Iran’s Supreme National Security Council has since confirmed the ceasefire deal and announced that further negotiations with the U.S. are set to take place in Pakistan’s capital, Islamabad, on April 10.
As part of the deal, Iran also initially agreed to reopen the Strait of Hormuz for the next two weeks under the condition that all vessel movement will take place in coordination with Iran’s Armed Forces and might be subject to limitations, according to a statement by Abbas Araghchi, Iran’s foreign minister.
However, on April 8, Iranian officials announced the closure of the Strait of Hormuz again due to Israeli military actions in Lebanon. As part of the ceasefire deal, Israeli authorities committed to suspend military attacks on targets in Iran but have since continued air and ground offensive operations against Hezbollah, a Lebanon-based militant group backed by Iran. Iranian authorities have since argued that Israel must halt all strikes against Hezbollah to comply with the agreement.
Prior to the ceasefire announcement, President Trump had threatened that the U.S. military would target power plants, bridges and other civilian infrastructure across Iran if the Strait of Hormuz isn’t reopened for all shipping traffic by 20:00 Eastern Time (EST) on April 7. It is unknown if the new closure of the Strait will attract further retaliation from the US.
Meanwhile, several Lebanese sources indicate that Hezbollah has halted attacks on targets in northern Israel as well as on Israeli troops inside Lebanon following the ceasefire announcement yesterday, but the group has yet to make an official statement about its position on the ceasefire deal. Israeli authorities have issued evacuation orders covering around 15% of Lebanon’s territory, mostly in southern Lebanon and the suburbs of its capital Beirut, since the conflict reignited, with more than a million people displaced across the country so far.
Iran closes Strait of Hormuz again after temporarily reopening following ceasefire deal
Following almost six weeks of fighting, the U.S. agreed to suspend its military campaign against Iran for two weeks in exchange for Iranian authorities reopening the Strait of Hormuz for all commercial vessel traffic with immediate effect. Iran’s foreign minister, Abbas Araghchi first announced that Iran will grant ships safe passage through the strait for the next two weeks as long as all transit activities are coordinated with Iran’s military and attacks on Iranian territory remain halted. However, the recent halting of traffic through the Strait suggests further disruptions are likely in the coming days.
Initial reports on the ceasefire deal suggested that Iran and Oman would be allowed to charge transit fees on vessels sailing through the Strait of Hormuz. Officials in Iran have reportedly proposed fees that would vary based on the type of ship, the cargo it carries as well as other conditions that have not been disclosed yet. Last week, Iranian officials announced that they were working with Oman to come up with a system that would require vessels to obtain permits to pass through the strait.
Oman’s Minister of Transport, Communications and Information Technology, Said Al-Maawali, has since clarified that no fees can be imposed on ships transiting the strait under international law. The U.S. government has further expressed its strong opposition to Iran’s plan to charge tolls. Other countries in the region, including Qatar and the United Arab Emirates, have also made it clear that free and safe navigation through the strait must be part of any permanent peace deal between the U.S. and Iran.
The governments of Canada, Germany, France, Italy, Spain, Denmark and the Netherlands issued a joint statement following the ceasefire announcement saying that they will contribute to ensuring freedom of navigation in the Strait of Hormuz but did not provide details on how they intend to accomplish this.
As of April 7, hundreds of vessels remained stuck in the Persian Gulf, with more than half of them believed to be carrying energy-related products such as oil, liquefied petroleum gas, and liquefied natural gas. At the time of writing, vessel traffic through the Strait of Hormuz has yet to resume, but ocean carriers such as A.P. Moller-Maersk A/S are reportedly working on clarifying the conditions under which their vessels would be allowed to transit the strait during the ceasefire. While carriers are cautiously optimistic about the possibility that the ceasefire could allow the trapped vessels to continue their journeys, some industry representatives cautioned that traffic is likely to resume at a slower, more gradual pace rather than all at once as vessels will remain at risk of getting stuck again if the ceasefire does not hold.
Despite lasting uncertainty about the political situation and the security environment in the region, global oil and gas prices dropped in response to the temporary ceasefire. Brent crude oil futures plunged by more than 15% and settled at around $92 (€ 79) per barrel on April 8, while natural gas prices in Europe fell by around 20%, the biggest drop in more than two years. The prices of refined fuel products such as jet fuel and diesel dropped as well.
Nevertheless, prices of a range of energy products could remain elevated way beyond the end of active military combat and the reopening of the Strait of Hormuz. Oil and gas fields in the Middle East were forced to reduce output during the conflict, while some refineries curtailed or halted production completely. It could take some of these facilities weeks to return to pre-war production levels even if they did not sustain any damage during the conflict.
Additionally, it could take months, or even years, to repair regional oil and gas infrastructure that was damaged by drone and missile strikes, which could curtail the region’s overall energy-related output for the foreseeable future.
Air traffic in and out of the Middle East is likely to ramp up following ceasefire
Air traffic in and out of the Middle East has also started to pick up in the hours since the ceasefire was announced. Aviation authorities in Syria, Iraq, and Bahrain reopened the countries’ airspaces shortly after the announcement of the 2-week truce.
In Syria, authorities have also allowed normal flight operations to resume at Damascus International Airport (IATA: DAM), which had been halted in response to the conflict. Israel’s Ministry of Transport, National Infrastructure and Road Safety (MOT) has confirmed that the country’s airspace will fully reopen from midnight on April 8 as it works with the country’s aviation-related authorities to ramp up flight levels at Tel Aviv’s Ben Gurion Airport (IATA: TLV), Israel’s main international airport.
From Sunday, April 12, flights are expected to resume at Ilan and Asaf Ramon International Airport (IATA: ETM) in southern Israel, while authorities plan to assess the resumption of flight operations at Uri Michaeli Haifa International Airport (IATA: HFA) in northern Israel in the coming days as fighting in southern Lebanon continues despite the ceasefire deal.
The war between Israel, the U.S., and Iran had started to cause business impacts in the aviation sector far beyond the Middle East, with a growing number of airlines warning that tightening fuel supply and rising costs pose a threat to their operations. While the resumption of energy shipments through the Strait of Hormuz could help to alleviate some of these concerns, the head of the International Air Transport Association (IATA), has since cautioned that jet fuel supply will likely take months to recover from disruptions caused by the conflict even if the Strait of Hormuz remains open. In Europe, benchmark prices for jet fuel reached $1.838 (€ 1.57) per tonne last week, more than double the cost compared to pre-war prices.
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