Energy Chokepoint Diplomacy: Iran Convenes Gulf Summit as Oil Markets Watch Strait Risk

A fifth of the world’s oil and gas moves through the Strait of Hormuz. That single fact explains why Iran’s plan to convene regional talks in Oman on Monday carries such enormous financial weight. The blockade of this waterway has severely disrupted energy supplies worldwide and hammered the budgets of Gulf nations dependent on oil and gas revenues, turning a geopolitical dispute into a direct threat to the fiscal health of some of the world’s largest hydrocarbon exporters.

Iran’s Foreign Ministry framed the gathering as an effort to “promote better understanding among the countries of the region and help strengthen shared regional security.” The underlying stakes, however, involve control of one of the world’s most strategically important shipping lanes and the financial arrangements that govern passage through it. Tehran wants international recognition of its authority over the strait and the ability to collect fees from vessels transiting through it, a demand Washington has rejected outright.

The numbers tell the story. Daily shipping traffic through the strait has plummeted approximately 95 percent since late February, dropping from a pre-war average of 130 to 140 ships daily to roughly five to seven vessels per day. That collapse in throughput has cascading effects on global energy markets and on the Gulf economies that depend on export revenues to fund public spending.

Participation in Monday’s meeting remains uncertain. Bahrain, a Gulf Cooperation Council member, has explicitly refused to attend. In a statement issued Saturday, Bahrain’s Ministry of Foreign Affairs said the kingdom “will not participate” and argued that regional security “cannot be preserved through a policy of appeasement.” Bahrain called instead for the Strait of Hormuz to remain open without “discrimination, fees or permits,” a direct rejection of Iran’s proposed toll model. The kingdom has not restored diplomatic ties with Iran since cutting them in 2016, unlike Saudi Arabia, which normalized relations in 2023.

By contrast, indirect negotiations mediated by Oman have continued among regional actors seeking to establish temporary shipping lanes and safe passage agreements. Iranian Foreign Minister Abbas Araghchi said Sunday that an agreement with Oman regarding safe passage routes will be presented at the meeting. He was clear, though, that the strait will not fully reopen unless the US meets Iran’s conditions, and that Tehran expects Washington to honor commitments from a June memorandum of understanding that collapsed in July after the US proposed an alternative route closer to Omani territory.

Qatari Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani visited Tehran late last month in an effort to de-escalate tensions and break the diplomatic stalemate between Iran and the United States. A source familiar with Monday’s meeting told Iran’s Tasnim news agency that an agreement on routes will be unveiled, though the fundamental question of who controls the strait and under what financial terms remains contested.

The current standoff reflects that deadlock precisely. Iran maintains that the strait is largely closed or tightly controlled and insists that normal transit will not resume until the US lifts naval blockades on Iranian ports and removes sanctions. US President Donald Trump has claimed total American control of the waterway, a position Iranian officials have challenged. A senior Iranian Revolutionary Guard Navy official warned US naval vessels against approaching the strait, stating that any vessel coming within 100 kilometers would face a response from Iranian forces.

Recent incidents underscore the commercial danger. On Sunday, at least one person was killed and four others wounded after an Iranian commercial vessel was attacked near Qeshm Island. The same day, the United Kingdom Maritime Trade Operations reported that a vessel was struck by an unknown projectile while transiting the strait. These attacks on commercial shipping raise the risk premium for any operator still willing to move cargo through the waterway, adding another layer of financial pressure to an already costly disruption.

Whether Monday’s talks produce a workable passage agreement or simply restate entrenched positions will determine how long global energy markets absorb the cost of a strait running at roughly five percent of its normal capacity.