Oil back to pre-war levels as Hormuz traffic rebounds; US reassures Gulf allies

DUBAI – Oil prices fell to pre-war levels on June 25 as the United States said flows through the Strait of Hormuz were nearing normal and its top diplomat completed a Gulf tour aimed at shoring up support for a preliminary Iran deal.

US Energy Secretary Chris Wright said on June 24 shipments through the strait were approaching levels seen before the US and Israel launched strikes on Iran on Feb 28, with at least 20 million barrels exiting the strait in the previous 24 hours.

During the conflict, Iran took effective control of the vital choke point, disrupting oil flows and rattling global energy markets and the wider economy.

Despite the recovery in traffic, Iran signalled it would continue to assert control.

Its Revolutionary Guards on June 25 warned vessels to stick to routes through the strait designated by Tehran, rejecting newly announced shipping routes not coordinated with Iran as unacceptable and dangerous.

The warning came after Oman announced temporary shipping lanes through the strait in coordination with the United Nations’ shipping agency.

Data from the UN’s International Maritime Organization showed that 57 ships carrying about 1,100 seafarers have transited the strait since June 23 under the evacuation plan.

US Secretary of State Marco Rubio sought to reassure Gulf allies wary of Washington’s preliminary accord with Tehran.

Speaking in Bahrain – home to the US Navy’s Fifth Fleet – he said the US was pursuing an enduring peace that would not come at the expense of regional security or prosperity.

He said Tehran would not be allowed to impose fees on vessels using the Strait of Hormuz, which before the war carried around a fifth of global oil and liquefied natural gas flows.

“The reality of it is that no country on earth has the right to charge for the use of international waterways, and that will never be an acceptable condition of any deal,” Rubio told Gulf Arab foreign ministers.

Oman’s Foreign Minister, Badr bin Hamad al-Busaid, told the meeting that future shipping arrangements should not involve tolls.

Trump faces criticisms

The diplomatic push comes as US President Donald Trump faces growing criticism at home over the Iran war.

In a closed-door meeting with fellow Republicans on June 24, Trump clashed with Senator Bill Cassidy shortly before his administration asked Congress for tens of billions of dollars to pay for the conflict.

Several Republicans who attended said Trump engaged in a shouting match with Cassidy, who said the administration needed to explain the framework deal Trump signed last week that gives Iran financial incentives but falls short of the goals he laid out at the war’s beginning.

“It does not appear, although I don’t know for sure, that the course of this is going the way that we were told,” Cassidy told reporters.

In a move seen as supportive of Trump, Senate Republican leaders scheduled a late-night vote to block a resolution seeking to end hostilities with Iran.

The Senate voted 50 to 47 to stop the war powers measure, which advanced procedurally in May.

“This vote puts Iran on notice,” Trump said on social media after the June 24 vote, although it does not affect the earlier vote.

The war is weighing heavily on Trump ahead of November elections that will determine control of Congress.

Just one in four Americans believes the war was worth its costs, a Reuters/IPSOS poll showed.

Conflicting accounts have emerged over elements of the framework deal, which has prompted criticism of Trump at home and abroad.

Disagreements persist over financial incentives for Iran, nuclear inspections, control of the Strait of Hormuz and Israel’s parallel war in Lebanon.

The deal sets up 60 days of talks to tackle thornier issues, such as Iran’s nuclear programme.

Regional scepticism

The deal has provoked scepticism in the Middle East, where many states came under attack from Iran during the war and view it as too generous to Tehran, including a US$300 billion (S$389 billion) fund and the easing of some sanctions.

Washington’s Gulf allies fear the reconstruction fund could help Iran rebuild its military. The accord also does not address Tehran’s ballistic missile capacity.

Under the agreement, Iran must allow shipping to move freely through the Strait of Hormuz for 60 days, and Tehran has suggested that it might impose tolls after that.

Iran could propose environmental, navigation and security fees in upcoming talks with Gulf states, said a diplomat briefed on the talks. Washington and its Gulf allies oppose such fees.

In Washington, Lebanon and Israel on June 24 discussed a US-backed proposal for Israel’s forces to pull out of some territory it invaded.

On June 25, senior Israeli and Lebanese officials denied that there had been any Israeli withdrawal from occupied southern Lebanon after a US official said Israel pulled some of its troops back in a good faith gesture.

Israel has been battling Hezbollah in Lebanon since the militant group attacked Israel on March 2 in support of Iran, and Tehran has made a cessation of hostilities there central to its demands in any lasting peace deal with the United States. REUTERS