The Strait of Hormuz is finally open for shipping after nearly 40 days of an effective blockade. The US and Iran reached a ceasefire agreement mediated by Pakistan that will bring an effective halt to hostilities for at least two weeks. Civilians on both sides of the Gulf, shipping brokers and those working at energy facilities breathed a collective sigh of relief as Trump’s deadline passed and peace prevailed. Oil also gave up its geopolitical-driven gains, plunging below $100 following the announcement. However, this does not indicate a return to normality for the energy markets any time soon, nor does it signal a quick recovery of production of oil and gas from producers in the Gulf. Even after the ceasefire announcement, Gulf states continued to intercept missiles and drones, and the agreement did not explicitly include a no-attack clause against Gulf states. In Abu Dhabi, authorities put out a fire at the Habshan gas complex after debris fell following an aerial attack. While Hormuz might be open, ship brokers are likely to exercise the utmost caution in transiting the narrow waterway. The 10-point proposal from Iran, which the US is reviewing, suggests continued Iranian control over Hormuz. This complicates matters for the Gulf states, which enjoyed free and uninterrupted flow of traffic before the war. Even if both sides have succeeded in achieving a temporary peace, navigational rights to the strait have now forever been changed.
Another Hormuz setback
Last week, Qatar attempted to send two liquefied natural gas tankers through the strait for the first time since the war began. However, tanker flow data from Marine Traffic showed the Marshall Islands-flagged Rasheeda and the Bahamian-flagged Al Daayen aborting an attempt to cross the strait on Monday. The attempt mirrored that of Cosco vessels - CSCL Indian Ocean and CSCL Arctic Ocean. After a failed crossing on March 27, both successfully cleared the strait three days later.
Bottom line: Even with the strait theoretically open, the aborted crossings suggest first-mover hesitancy will persist, with shipowners waiting for others to test the water before committing their own vessels.
Backlog in the Gulf
With the Strait reopening, attention now turns to the enormous volume of cargo that has built up during the war. More than 800 vessels remain trapped in the area as shipowners rush to assess the ceasefire's fine print. According to Kpler, 172 million barrels of crude and products remain on the water across the Gulf, spread across nearly 187 laden tankers. Around three-quarters of that volume is crude and condensate and parked on very large crude carriers (VLCCs). It is dominated by medium and heavy sour grades produced in Saudi Arabia, Iraq and the UAE. Around 8 million barrels per day remain stranded, even after accounting for Saudi Arabia's East-West pipeline, the UAE’s exports via Fujairah, and continued Iranian transits, according to Kpler's six-week assessment.
Bottom line: An open strait does not imply a functioning one. The composition of the backlog, which includes large vessels carrying heavy grades requiring specific deep-water terminals, limits how quickly buyers can absorb it.
Egypt: crisis averted
The war's toll on Egypt has been stark. Its monthly gas import bill has nearly tripled from $560 million to $1.65 billion after international LNG prices surged from $12–14 to around $20 per million British thermal units. Daily power cuts of more than two hours have become routine across working-class neighbourhoods in Cairo and Giza. The resumption of Israeli pipeline gas exports, of around 1 billion cubic feet per day, which is close to pre-war levels, offers some respite. However, it is not enough to offset the broader damage to public finances.
There are, however, bright spots. On Monday, Eni announced a discovery of approximately 2 trillion cubic feet of gas and 130 million barrels of condensate at the Denise W1 well, 70km off Egypt's coast, with fast-track development possible given its proximity to existing infrastructure. Separately, Dragon Oil, which is fully owned by Emirates National Oil Company, announced a new oil find in the Gulf of Suez, with initial testing indicating a production rate above 2,000 bpd. For a country in acute energy distress, the finds are welcome, but development and first gas are still years away.
Bottom line: Egypt is haemorrhaging over $1 billion a month on energy imports, and new discoveries, however promising, cannot plug that gap in time.
Chart of the week
Data visualisation by Fadah Jassem.
Big number
$1.65bn
Egypt's monthly natural gas import bill, which has nearly tripled since the war began, is driven by surging LNG spot prices
Jargon buster: Gas initially in place (GIIP)
The total volume of natural gas estimated to exist in a reservoir before any production begins.
Happening this week
- April 10: Proposed US-Iran talks in Islamabad
- April 13-18: IMF & World Bank Spring Meetings, Washington, DC
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