Iran's Draft Hormuz Transit Plan Bans US and Israeli Ships, Sending Brent Back Above $82
The market spent most of this week pricing in a reopening. Then Fars published the draft, and the trade unwound in about an hour.
Brent settled Thursday at $82.49, up 3.8%. WTI closed at $77.29, up 2.8%. Friday morning added another 1.25% on Brent and 1.10% on WTI, putting the international benchmark near $83.50. That still leaves the week down roughly 8%, because Monday and Tuesday were spent on the assumption that a deal was imminent. Treasury Secretary Scott Bessent went on CNBC Tuesday and said an agreement restoring freedom of movement through Hormuz could land as soon as Wednesday. Wednesday came and went. So did Thursday.
What arrived instead was a preliminary bill, now sitting with a parliamentary committee in Tehran, that reads like the opposite of freedom of movement.
What the draft actually says
Three provisions matter.
US and Israeli vessels would be banned from transiting the strait outright. Not fee-based, not conditional. Banned. The text reportedly extends to Israeli-linked civilian shipping, not just military hulls, which in practice means beneficial-ownership screening on a fleet that routes through flags of convenience precisely to avoid that kind of scrutiny.
Ships from other countries Iran deems to have harmed it would be barred until compensation is paid for war damages. Tehran has not published the list, which is the point. An unpublished list of hostile states is a permanent negotiating instrument. Every flag state and every charterer has to assume it might be on it.
Violators would face fines of up to 20% of cargo value. That number is not an accident. It mirrors the 20% fee the United States announced on all Hormuz cargo when it reimposed the blockade in mid-July. Iran has taken Washington’s own coercion mechanism and pointed it back down the same waterway.
The fee gap is the real blocker
Underneath the draft, the Iran-Oman corridor talks are stuck on price.
The corridor concept itself is workable on paper: inbound traffic runs through Iranian territorial waters, outbound traffic through Omani waters, with Muscat administering the exit route. Negotiators reportedly finished a draft of that arrangement and sent it up for Khamenei’s approval. It revives most of the June memorandum that fell apart when attacks on shipping resumed.
The money is where it stalls. Iran wants 5% to 7% of cargo value. Oman has floated 3%. Washington wants zero, and has said so publicly and repeatedly.
Industry sources are already flagging the mechanical problem, which is more serious than the spread. Even if the three parties split the difference, there is no clean way to pay it. US sanctions block most routes for moving money to Iranian accounts. Marine insurance policies carry sanctions-exclusion clauses that void coverage on transactions touching designated entities. A shipowner who pays a transit fee to Tehran may find the underwriter walks away from the hull and cargo cover on that same voyage. Nobody sails uninsured through a war zone.
So the deal that markets rallied on Tuesday is not just unsigned. It may not be executable in the form being negotiated.
Traffic is still near zero
Kpler counted eight transits through Hormuz on Tuesday. The pre-war baseline was 130 to 140 a day. The war started February 28. Five months in, the strait is running at roughly 6% of normal throughput, and the price of Brent is up about 28% year to date.
That gap between a near-total closure and a 28% move tells you how much substitution has already happened. Saudi Arabia’s East-West pipeline, the Yanbu terminal on the Red Sea, and Emirati capacity out of Fujairah have absorbed a meaningful share. Demand destruction and coordinated releases have taken more.
Which is exactly why the Houthis are hitting the workarounds. They claimed a strike Wednesday on the Saudi tanker Wafa off Yanbu. An Indian-flagged vessel sank off Yemen on Tuesday after being hit by an explosive-laden boat. Another cargo ship was struck near Al Khasab in the strait itself, and UKMTO logged a separate report of two explosions off the Omani coast Wednesday, with crew and vessel reported safe. On Thursday the Houthis said they attacked Saudi troop positions inside Yemen.
Yanbu is not a side theater. It is the pressure valve that has kept Brent at $83 instead of $130. Every hit on it narrows the bypass.
Two other supply items landed the same week
US imports of Saudi crude went to zero in July. First time since 1985. That is partly logistics and partly the reordering of who buys from whom under a blockade regime, but a forty-year series breaking is worth logging.
And Ukraine struck two major Russian refineries overnight, Yaroslavl and Bashneft’s Novoil plant. Different conflict, same barrel. When two of the world’s largest exporters are both having their export infrastructure degraded in the same week, the risk premium is not a Hormuz story anymore.
What to watch
The draft bill is preliminary and sits with a committee, which means it is as much a bargaining posture as a policy. Tehran publishes maximalist text, watches the tape move three dollars, and confirms that the closure still has leverage in it. That is a cheap way to test the market and an expensive one for anyone short volatility.
The signal that matters is not another Fars publication. It is whether Khamenei signs the Oman corridor draft, and whether anyone solves the payment problem underneath it. Until a mechanism exists that lets a Greek owner pay a transit fee without losing his insurance, the corridor is an idea rather than a route.
Trump said Thursday he thinks the war ends pretty soon. The parliamentary committee in Tehran is reviewing a bill that assumes it does not.