Iran's Hormuz demands target US Navy, 20% of world oil

Iran is using Hormuz negotiations to demand US Navy warships be barred from the strait, seeking to end America's Gulf military presence and control the chokepoint carrying 20 percent of world oil.

"No matter what Trump does, the fundamental result is going to be significant Iranian de facto control over the strait," said Jonathan Panikoff, a former senior US intelligence officer now with the Atlantic Council, a Washington think tank.

US officials have told mediators they will not accept Iranian restrictions or tolls on Hormuz traffic. The draft agreement would temporarily establish an inbound lane near Iran and an outbound lane near Oman, while Washington would lift its blockade on Iranian ports if Tehran opened the waterway without impediments. The Pentagon sent two guided-missile destroyers through Hormuz in April at the height of the conflict, showing Iran cannot militarily deny access — but commercial traffic that matters for global energy markets remains crippled.

About a fifth of the world's oil flows through the strait, along with tens of billions of dollars in Qatari liquefied natural gas annually. Brent crude has traded in the low-to-mid eighties, well below its wartime peak above $120 in March, as traders price cautious hope for a deal. Treasury Secretary Scott Bessent said the strait would "never" return to its previous role, predicting more than 50 to 70 percent of energy would shift to underground pipelines over the next two years.

The Iranian demands reflect the ascendance of hard-liners within the Islamic Revolutionary Guard Corps, who have long sought the ouster of American forces from the region. Though Iran has taken a devastating military beating during the six-month conflict, its leaders now see negotiations over ending the war as an opportunity to achieve what decades of confrontation could not.

Iranian officials have publicly made the threat during negotiations with Oman, the sultanate on the strait's southern coast leading discussions with Tehran. A draft published by Iranian state media also bars Israeli vessels, threatens violators with penalties worth up to a fifth of their cargo value, and demands compensation for war damage before "hostile" countries are let through. Mediators said the Iran-Oman agreement doesn't include those provisions, but they still took the demands seriously after Iranian officials communicated them to Arab mediators, leading to a setback in the talks.

The US naval presence in the Gulf stretches back to 1971, when Washington took over a British base in Bahrain and later made it the headquarters of the Navy's Fifth Fleet. The footprint expanded to roughly 30,000 troops at bases in Kuwait, Saudi Arabia, Qatar and the United Arab Emirates. But Iranian attacks on those bases have forced the Pentagon to redeploy troops and rely heavily on less-vulnerable installations outside the Gulf.

Mines complicate any reopening

Iran has deployed dozens of Maham-3 and Maham-7 naval mines in the strait, according to US officials. These fixed mines carry magnetic and acoustic sensors, meaning direct contact is not necessary for detonation. The US Navy has spent weeks clearing a single corridor using underwater drones and countermeasure vessels, and still describes the normal route as extremely hazardous.

Demining has become the diplomatic bottleneck. Tehran's public line has been blunt — a deputy foreign minister wrote in June that "demining is conducted solely by Iran and no other country" — but Bloomberg reported on August 4 that Iran is weighing whether to let European navies do the work. That would give shipowners and insurers the third-party assurance they need before rates come down.

Gulf states hedge against Iranian control

Gulf officials acknowledge that the proposed agreement gives Tehran control over the strait and that control may be permanent, but say it is their best option at the moment. The Revolutionary Guard has shown it is willing to escalate and make the war as costly as possible for Washington's regional allies.

Gulf countries are already looking at plans to bypass Hormuz by expanding pipelines to the Red Sea and the Gulf of Oman, as well as expanding investments in overseas oil storage. But regional officials say without a credible peace deal, bypasses won't prevent the Revolutionary Guard from targeting their energy infrastructure.

The last time the strait was effectively contested was during the Iran-Iraq War in the 1980s, when the "Tanker War" led to US naval escorts and a reflagging operation. That episode ended with the US Navy firmly established as the guarantor of Gulf shipping. This time, the outcome could be different.

Trump has described Iran as being under a "third regime," arguing that successive layers of the country's leadership were killed in US and Israeli strikes. But the hard-liners now in charge appear more determined than ever to use the strait as leverage. Mohsen Rezaei, a retired Revolutionary Guard commander and close adviser to Supreme Leader Mojtaba Khamenei, said Thursday that Iran wouldn't allow the opening of alternative routes through the strait.

Chris Long, a former British Navy officer in the Persian Gulf now head of intelligence at shipping advisory Neptune P2P Group, said he expects energy flows through the waterway will be "slow and low for years."

Meanwhile, Saudi Arabia, Turkey and Pakistan signed a trilateral defence agreement in Mecca this week, under which an attack on any one of the three countries would be treated as an attack on all. The pact comes as Gulf states reassess their security arrangements after the US-Israel strikes on Iran on February 28 triggered retaliatory attacks on Saudi Arabia and other Gulf targets.

This article is for informational purposes only and does not constitute investment advice.