The military conflict between the US and Israel against Iran, which erupted on February 28, has lasted for nearly six months. The interim memorandum of understanding signed on June 17 was originally scheduled to be converted into a permanent peace agreement around August 17, but negotiations have stalled. Senior Iranian officials have clearly stated that if the terms of the agreement cannot be implemented, Tehran will adopt a full-scale offensive military posture and is prepared to launch precision strikes in and around the Strait of Hormuz to break the US naval blockade. US President Trump has directly ruled out the possibility of extending the interim ceasefire and threatened to launch airstrikes against Oman if it "obstructs" the strait's management. Meanwhile, the Houthi rebels in Yemen announced a missile attack on a Saudi warship and four escort vessels near Mocha in the Red Sea, further escalating tensions along the region's energy corridor. Approximately one-fifth of the world's oil and liquefied natural gas are traditionally transported through the Strait of Hormuz, and current flows are far below pre-war levels, fueling growing market concerns about supply disruptions.

The interim agreement broke down and the negotiation deadline was missed.

The memorandum of understanding signed by the US and Iran on June 17 stipulated that a broader agreement be reached within 60 days on Iran's nuclear program, US sanctions, and arrangements for passage through the Strait of Hormuz, and declared an "immediate and permanent cessation of military operations on all fronts." Article 5 of the memorandum was interpreted by Iran as granting it the right to manage the Strait of Hormuz, which is jointly owned by Iran and Oman. The US rejected this interpretation, insisting that the strait should be restored to its pre-war state of free passage. Monday (August 17) was originally the deadline for reaching a final agreement. Iranian officials told the media that relevant agencies must be prepared to escalate tensions in the strait and the wider region. He emphasized that if diplomatic efforts failed, Tehran would launch a "timely and precise" military strike. Iran is also negotiating with Oman on the strait's management, and the two sides are reportedly close to reaching an agreement, but progress is slow. The mediators will convey the short-term deadline set by Tehran to Washington and regional countries. The US position is clear. When asked whether it would seek to extend the interim agreement, Trump gave a negative answer. He further stated that if Oman obstructs the relevant arrangements, airstrikes will be launched against Oman. This statement expands the focus from the potential conflict between the US and Iran to Gulf partners, highlighting the complexity of the Straits control dispute.

Current Status of Strait of Hormuz Flow and Energy Market

Before the war, the Strait of Hormuz transported approximately 20 million barrels of crude oil and petroleum products daily, accounting for about a quarter of global seaborne oil trade, with the majority destined for Asia. Qatar and the UAE also heavily relied on this passage for liquefied natural gas (LNG) exports, accounting for nearly 20% of global LNG trade combined. After the outbreak of the conflict, traffic through the strait nearly came to a standstill. A brief recovery occurred after a provisional agreement was signed in June, with crude oil flows rising to tens of millions of barrels on some days, but subsequently declined sharply again due to disputes over control and US blockade measures. Latest tracking data shows that the daily flow of crude oil and related liquids through the strait is currently far below pre-war levels, with estimates fluctuating in the millions of barrels from different sources, and the presence of "smuggled" vessels. Saudi Arabia and the UAE can partially bypass the strait using alternative routes such as pipelines (the Saudi East-West Pipeline to Yanbu Port on the Red Sea, and the UAE to Fujairah Port), with a usable capacity of approximately 3.5 million to 5.5 million barrels per day, but this cannot fully compensate for the shortfall. Overall oil production in the Middle East remains significantly lower than before the war. Assessments by both the International Energy Agency and the U.S. Energy Information Administration indicate a significant global oil supply gap in 2026, with demand also adjusting due to high prices and economic factors. Major Asian importers are heavily reliant on Middle Eastern crude oil, and supply uncertainty continues to impact both spot and futures markets.

Houthi attacks on the Red Sea exacerbate pressure on both access routes.

Amidst the stalemate in US-Iran negotiations, a Houthi military spokesman in Yemen announced on Monday that missiles had been used to attack a Saudi warship and four escort vessels off the coast of Mocha, Yemen. Saudi Arabia has not yet immediately confirmed this. Mocha port is near the Bab el-Mandeb Strait, which connects the Red Sea to the Gulf of Aden and is another vital global shipping chokepoint. The Houthis have imposed a Red Sea blockade on Saudi Arabia since July in response to what they call a Saudi siege of Yemen (which Saudi Arabia denies). Last Tuesday, the group attacked ships in the Bab el-Mandeb Strait, killing four crew members. Yemeni international sources acknowledge that the Houthis fired six missiles at a ship in the Bab el-Mandeb Strait, which had been out of service for over a year for maintenance and is believed to have been empty at the time of the attack. The instability of the Red Sea route further reduces alternative routes for Gulf oil, compounding the risks associated with the Strait of Hormuz and the Bab el-Mandeb Strait.

Prospects for Regional Negotiations and Escalation of Military Posture

Iranian officials have emphasized that the United States must implement all the terms of the agreement within the set short-term deadline, as a prerequisite for further negotiations. Tehran is prepared to make difficult decisions. Meanwhile, negotiations between Iran and Oman on the management of the Straits are seen as a crucial component of a broader agreement, but the US is taking a hard line against any proposals that might involve fees or changes to sovereignty arrangements. Trump's recent hardline rhetoric regarding control of the Straits, including statements that it might be considered within the sphere of US interest, has further escalated the risk of confrontation. The conflict began with the US-Israeli attacks on Iran on February 28, and the two sides have continued to engage in military, economic, and diplomatic maneuvering since then. The interim agreement was intended to create space for nuclear issues, sanctions lifting, and freedom of navigation, but disagreements over the interpretation of control led to its rapid collapse. Currently, there are no clear signs that the parties are moving towards ending the conflict.

Editor's Summary

After the deadline for the interim US-Iran agreement expired, Iran openly adopted a full-scale offensive posture. The US refused to extend the agreement and threatened to strike Oman, making the dispute over control of the Strait of Hormuz the core sticking point. The traditional daily oil flow through the strait, approximately 20 million barrels, has shrunk dramatically, with limited alternative routes. Coupled with the Houthi attacks in the Red Sea, global energy supply and shipping security face dual pressures. Negotiations have stalled, the risk of military escalation has increased, and market pricing for supply disruptions will continue to be influenced by geopolitical dynamics. The opposing positions of the parties are clearly divergent, making a fundamental easing unlikely in the short term. Analysts point out that the Strait of Hormuz transported approximately 20 million barrels of oil daily before the conflict; current flow has shrunk significantly, and coupled with Iran's threat of a full-scale offensive and the Houthi attacks in the Red Sea, the risk of supply disruptions has increased significantly. The market is repricing geopolitical premiums, and Brent crude oil faces significant upward pressure and increased volatility in the short term. If the conflict escalates and further obstructs the strait, oil prices may surge rapidly; if there are signs of easing in negotiations, the upside potential will be limited. Overall, the events have amplified supply-side uncertainty, making international oil prices more likely to rise than fall. Brent crude oil rose nearly 3% to a near three-week high on Monday (August 17), and fluctuated at high levels in Asian trading on Tuesday, once touching $91.34 per barrel, a new high since July 28.

Frequently Asked Questions

Q: Why is the Strait of Hormuz so crucial to the global energy market? What is the current flow rate? A: The Strait of Hormuz is a narrow waterway connecting the Persian Gulf and the Arabian Sea, only about 54 kilometers wide at its narrowest point. It is the main channel for Middle Eastern crude oil and liquefied natural gas exports. Before the war, it transported approximately 20 million barrels of crude oil and petroleum products daily, accounting for about a quarter of global seaborne oil trade, with about 80% destined for Asia, primarily China, India, and Japan. Qatar and the UAE also heavily rely on this channel for LNG exports, accounting for nearly 20% of global exports combined. After the outbreak of the conflict, flow rates plummeted. There was a brief rebound during the interim agreement in June, but it subsequently shrank significantly again due to the dispute over control. Latest tracking shows that the daily flow rate is far below pre-war levels, with estimates from different data sources ranging from several million barrels, and there is evidence of covert shipping activity. Saudi Arabia and the UAE can partially bypass the strait via pipelines, with a usable capacity of approximately 3.5 million to 5.5 million barrels per day, but this cannot completely replace the strait. The supply gap has led to a significant imbalance in the global oil market, with price and inventory adjustments continuing. Q: What were the main contents of the interim memorandum of understanding between the US and Iran in June? Why did it break down so quickly? A: The 14-point memorandum of understanding signed on June 17 required both sides to immediately and permanently cease all military operations on all fronts and to reach a broader agreement within 60 days on Iran's nuclear program, US sanctions, and arrangements for passage through the Strait of Hormuz. The memorandum stipulated that Iran would make efforts to arrange safe passage for commercial vessels free of charge for 60 days and to discuss future management arrangements for the strait with Oman. The US, in turn, was required to lift the blockade of Iranian ports and partially ease sanctions. The core of the breakdown lay in the interpretation of Article 5: Iran believed it had the right to manage the strait, while the US insisted on restoring pre-war free passage and rejected any arrangements involving fees or changes in sovereignty. Shortly after the agreement was announced, it quickly became invalid due to the dispute over control of the strait and actual obstacles to passage. When the original deadline of August 17 arrived, negotiations had made no substantial progress, and both sides accused each other of failing to fulfill the terms, preventing the interim arrangement from becoming a permanent agreement. Q: What is the background to Trump's threat to strike Oman? What impact will this have on the regional situation? A: Oman shares the Strait of Hormuz with Iran and has long played a mediating role between the US and Iran. Iran and Oman recently held negotiations on the management and passage arrangements of the Strait of Bab el-Mandeb Strait, and are reportedly close to reaching an agreement. Trump believes that if the arrangements between Oman and Iran interfere with the US position on the Strait or naval operations, they will constitute an obstacle, and therefore publicly threatened airstrikes. This statement expands the risk of conflict from a direct confrontation between the US and Iran to Gulf partners, shaking Oman's position as a neutral mediator. Regional countries are generally concerned that military escalation will further damage shipping security and energy exports. The US insists that the Strait should maintain its international passage status, while Iran emphasizes sovereignty and management rights; the opposing positions have put Oman in a dilemma. The threat itself has already increased market pricing of geopolitical risks and may prompt more countries to reassess the balance of their relations with the US and Iran. Q: How will the Houthi attack on a Saudi warship and the Red Sea blockade affect energy transport? A: The Houthi rebels imposed a Red Sea blockade on Saudi Arabia in July, claiming it was in response to Saudi Arabia's siege of Yemen. On August 17, they announced a missile attack on a Saudi warship and four escort vessels near Mocha, close to the Bab el-Mandeb Strait, a vital global shipping chokepoint. The group has previously attacked related vessels multiple times, causing casualties. The Red Sea and the Bab el-Mandeb Strait are important alternative routes for Gulf crude oil to bypass the Strait of Hormuz. Saudi Arabia transports some crude oil to Yanbu Port in the Red Sea for export via the East-West Pipeline. The Houthi attacks have increased ship insurance costs and navigation risks, leading to a decrease in traffic on some routes and further compressing alternative transport capacity. The simultaneous pressure on both routes (Hormuz and Bab el-Mandeb) has increased uncertainty for Middle Eastern crude oil exports, raising concerns about supply disruptions in Asian and European markets, and exacerbating volatility in spot premiums and freight rates. Question: What are the current military and diplomatic prospects for the US-Iran conflict? Is there any possibility of de-escalation? Answer: The conflict, which began with the US-Israel attacks on Iran on February 28, has caused significant casualties and economic losses and severely disrupted global energy trade. After the expiration of the interim agreement, Iran openly prepared for a full-scale offensive and precision strikes. The US ruled out an extension and adopted strong rhetoric, resulting in extremely low mutual trust between the two sides. The nuclear issue, the lifting of sanctions, and control of the Strait are the core differences that are difficult to bridge in the short term. The mediators are still working to convey messages, but there are no clear signs that the parties are moving towards ending the conflict. The risk of military escalation is rising, particularly with the potential for further confrontation in the Taiwan Strait and the Red Sea passage. While the diplomatic window is not entirely closed, substantial compromises are needed between the two sides regarding interpretation and actual control. The market and shipping industry have priced in prolonged uncertainty as the baseline scenario, with supply recovery expected to be slow and price and inventory adjustments continuing for some time. At 10:53 Beijing time, Brent crude oil was trading at $91.26 per barrel.