(April 18): Iran on Saturday reimposed restrictions on vessel traffic through the Strait of Hormuz and Israel attacked targets in Lebanon, undermining expectations of an imminent peace deal touted by US President Donald Trump.
The Islamic Republic broadcast to ships that the waterway was closed to maritime traffic, and one supertanker reported gunfire, according to owners of vessels in the area who asked not to be identified because of the security situation.
Chaos in the Strait of Hormuz — through which about a fifth of the world’s oil and liquefied natural gas (LNG) transited before the US-Israel war on Iran began in February — erupted a day after Iran said the waterway would reopen to commercial vessels. Earlier in the day, Iran rejected a US demand to keep a naval blockade in place until a deal is signed, calling it maritime “banditry”.
There were also signs the ceasefire in Lebanon — linked to Iran’s decision to allow Hormuz traffic — may be fraying. The Israel Defense Forces said it struck “saboteurs” approaching its troops in violation of the truce. The developments upend rising optimism that the US and Iran were nearing a broad agreement to end a seven-week war that has claimed thousands of lives and disrupted energy exports from the Persian Gulf.
On Friday, Trump said a deal with Iran may be imminent, adding that he would work with the Islamic Republic to recover the country’s “nuclear dust.”
But Esmail Baghaei, the country’s Foreign Ministry spokesman, told state television that enriched uranium “is as sacred to us as Iran’s soil, and it won’t be transferred anywhere under any circumstances”.
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The material — which the US says was buried deep underground after its bombing of Iran’s nuclear facilities during last year’s 12-day war — lies at the core of efforts to end the conflict, and its fate is central to any broader deal.
Momentum for a lasting peace had been building, with Tehran saying on Friday that Hormuz was open for commercial shipping.
Cracks began to emerge Saturday with Iran’s criticism of the continued US blockade.
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The UK Navy soon after said a tanker was approached by Islamic Revolutionary Guards Corp gun boats before being fired at, adding that the vessel and its crew were safe.
Iran’s Supreme Leader Mojtaba Khamenei said the country’s “navy stands ready to make enemies taste the bitterness of new defeats” in a statement marking the National Army Day. It wasn’t clear if his message was in direct response to developments surrounding Hormuz.
Several oil tankers made a U-turn on Saturday after appearing to try to transit the narrow waterway. It wasn’t immediately clear why they changed course.
Others still sought to seize the opportunity provided by the Friday announcement. The FPMC C Lord, a very large crude carrier laden with Qatari and Saudi crude, sailed south of the Iranian island of Larak and was heading into the Gulf of Oman around mid-Saturday, indicating its destination as Fujairah in the United Arab Emirates.
A handful of other oil carriers were also pointing towards the waterway. Earlier, three LNG carriers and an oil-product tanker — some of them sanctioned by the US — headed east into the Gulf of Oman, while a Pakistan-flagged products tanker followed not far behind. Several LNG carriers were also nearing the strait.
“While a deal appears to be in sight that may bring an end to the current round of US-Iran hostilities and relief to energy markets, it’s unlikely to result in a full or lasting peace,” Bloomberg Economics analysts including Jennifer Welch wrote in a report. “We assess any deal will be limited and fragile.”
Trump told Bloomberg in a phone interview on Friday that Iran had agreed to suspend its nuclear programme indefinitely, and “most of the main points” in discussions with the country were finalised.
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He denied that the US would release any frozen funds to the Islamic Republic — a key demand of Tehran that he has long decried.
“I just think it’s something that should happen. It’s something that only makes sense to happen. And I think it will. We will see what happens,” Trump said separately on the prospect of reaching a deal with Iran, as he was returning to Washington from a Phoenix event. “I think that is going to be very beneficial. And the main thing is that Iran will not have a nuclear weapon.”
The president also floated the threat of resuming strikes on Iran once the current ceasefire expires next week. “Maybe I won’t extend it, so you have a blockade, and unfortunately we have to start dropping bombs again,” he said.
Trump’s comments and Tehran’s declaration on Hormuz on Friday were the latest signs the two sides were working behind the scenes on a deal after their first round of direct talks in Pakistan last week failed to yield an agreement.
The war saw Iran retaliate against US bases across the region and strike oil and gas infrastructure belonging to American allies in the Gulf, triggering a global energy crisis.
Oil, fuel and natural gas prices plunged on hopes that the latest developments would mean an end to the war and more energy supplies could transit safely through Hormuz. Brent crude dropped 9% on Friday to around US$90 ($114.31) a barrel, wiping out most of the gains it posted since the onset of the war. Diesel prices in the US and Europe were also lower.
In a notable shift, real-world oil prices also eased significantly alongside headline futures prices. On Friday, dated Brent, the world’s most important physical price, fell below US$100 a barrel for the first time since March 11. Stocks extended their rally on speculation the war would soon end.
One proposal under discussion is for the US to release US$20 billion in frozen Iranian funds in return for Tehran giving up its stockpile of enriched uranium, Axios reported, citing two US officials and two additional sources briefed on the talks whom it didn’t identify.
Trump pushed back on that idea in the phone interview, repeatedly saying “no” when asked if he would release the US$20 billion.
Pakistani and US officials suggested another round of talks were in the works. Asked if he would travel to Pakistan to sign an agreement, Trump said, “I may.” Iran said it has yet to agree to another round of negotiations.
Many traders and analysts remain sceptical that meaningful crude flows can resume quickly. The US has said the blockade imposed earlier this week on ships travelling to and from Iranian ports remains in place.
In the phone interview, Trump said the US-Iran discussions were a “totally separate deal” from the Lebanon ceasefire. Still, Israel’s military campaign in southern Lebanon against Hezbollah, an Iranian proxy, had been a major impediment to a broader deal.
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