Safe Passage? What Does Trump’s Deal Mean for the Strait of Hormuz 

The Strait of Hormuz—a 33km-wide corridor linking the Arabian Gulf to global markets—carries around one fifth of the world’s crude oil and liquefied natural gas, alongside critical industrial inputs underpinning energy, food systems and manufacturing supply chains. 

In early March, Iran moved to close—and in practice severely restrict—the Strait to commercial shipping in response to joint U.S.-Israeli military strikes that triggered a wider regional, multi-theater conflict. This had immediate repercussions for the global economy. The usual passage of more than 3,000 vessels per month through the Strait plummeted to just 191 in April, forcing Saudi Arabia and the United Arab Emirates to shutter key refining operations, while Iraq cut output from the Gulf port of Basra. 

The result was oil surging beyond USD 120 a barrel, maritime insurance premiums rising more than 50%, and warnings of manufacturing slowdown in China alongside pressure on global agriculture yields tied to fertilizer supply disruptions. The shock also exposed the fragility of medical supply chains and the infrastructure underpinning digital services. Inflation in major economies reversed recent downward trends, with U.S. consumer price index (CPI) reaching a three-year high of 4.2%.  

Ensuring the Strait could reopen became an immediate international priority. On March 21, 22 countries—the UAE and Bahrain among them—declared their readiness to guarantee passage through “one of the world’s most critical waterways,” a message echoed by Chinese President Xi Jinping and Saudi Arabia’s Crown Prince Mohammed bin Salman, who warned of “a grave threat to global energy security and economic stability”. 

On June 15, U.S. President Donald Trump announced an agreement with Iran to cease hostilities, curb Iran’s nuclear weapons program and reopen the Strait. As G7 leaders gathered in Évian-les-Bains, optimism was tempered by questions over enforceability, free passage and whether Israel would acquiesce to a process from which it had been sidelined. 

The deal, however, is unlikely to deter Gulf states from pursuing alternative trade corridors. The UAE is advancing a major expansion of its east-coast ports at Dibba, Fujairah and Khor Fakkan, alongside new rail and road links and a second West-East pipeline, in what UAE Minister of Foreign Trade Dr. Thani Al Zeyoudi describes as a push towards “zero Hormuz dependency.” Similar calculations are now taking hold beyond the Gulf, as governments reassess infrastructure priorities and the balance between efficiency and redundancy in an increasingly volatile operating environment. 

With reactions to the deal still unfolding, three scenarios stand out for the remainder of 2026. 

1. A full reopening, albeit with Iranian oversight  

The settlement restores transit through the Strait, with Washington stepping back from escalation and Tehran retaining oversight—and potentially imposing tolls—in exchange for passage under defined conditions. Israel remains opposed, and tensions in Lebanon sustain the risk of renewed conflict.  

Shipping returns gradually, supported by clearer rules of engagement. Insurance costs ease but remain above pre-conflict levels, while alternative routes continue as a complement rather than a substitute. 

Oil prices would ease towards USD 80 per barrel by year-end 2026, with further declines to USD 65 in 2027. The IMF’s global GDP growth forecasts would recover towards 3.1%. 

2. A fragile truce in which suspicion dominates 

A deal may exist, but disputes over terms, compliance and tolls keep conditions fluid. The result is a fragmented operating environment: elevated insurance costs, uneven shipping and persistent uncertainty. Gulf states accelerate investment in alternative corridors—not as contingency, but as structural hedges. 

This environment favors China, India and other neutral or aligned economies more than the United States and its partners. The effects would be even more acute for landlocked and import-dependent economies, where limited alternatives compound both cost pressures and supply risks.  

Oil prices remain elevated, with global growth slipping below 2% and inflation approaching 5.4%.  

3. The deal collapses and dual chokepoints emerge 

This is, in the words of Cambridge University Middle East scholar Elizabeth Kendall, the “nightmare scenario”: a resumption of hostilities that closes not only the Strait of Hormuz, but also the Bab el-Mandeb as Houthi attacks on Red Sea shipping intensify—and potentially extend to key Saudi pipeline infrastructure. 

Driven by declining political appetite in Washington and a sense of unfinished strategic objectives in Tel Aviv, a broader regional conflict would severely constrain energy and commodity flows, with global consequences comparable to the COVID-19 shock. 

Oil prices could balloon past USD 150, while fertilizer shortages drive spikes in food prices, with immediate effects on inflation, food security and economic growth. 

4. What This Means for Markets and Policymakers 

In terms of likelihood, the balance of probability still points to the Strait reopening and a managed restoration of flows—but with little confidence in long-term stability. Energy markets are therefore likely to remain structurally tighter and more volatile for the remainder of 2026, with global supply chains adapting to sustained cost pressures and continued uncertainty. 

But the lasting shift is psychological as much as physical. As Neil Quilliam of Chatham House has observed, “now that Hormuz has been closed, it can be closed again and again.” What was once treated as a remote tail risk is now a proven one, and one that markets, governments and businesses will have to factor into their decisions long after the current crisis subsides. 

The more immediate question, however, may be less about reopening routes than rethinking them altogether. The past few months have exposed the trade-offs between efficiency and resilience, forcing governments to confront a harder question: how much redundancy is enough?  

Building alternative ports, pipelines, trade corridors and logistics links comes at a price—one that competes with other development priorities. But as the Strait of Hormuz has shown, the cost of underinvestment can be far higher. The challenge now is not simply restoring flows, but deciding how far to reconfigure them.