The Strait of Hormuz Is Open (Sort Of). So How’s It Going?

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It's Monday, June 22nd. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that moved the world today.

The U.S.-Iran peace deal that was signed on Wednesday last week was meant to reopen the Strait of Hormuz. So how exactly is that going? I'm joined now by WSJ reporter Joe Wallace. Okay, Joe, let's start with what's going on in the Strait right now. Are we seeing ships moving through it?

Joe Wallace (1:32)

Yeah, there's been a notable uptick in traffic over the past week or so.

We have to be careful not to read too much into any one day's transit numbers, but there has definitely been a heavier flow of leaving in particular over the past week or so. Also, quite a few ships going in, but the ships coming out are really the more interesting ones right now. They're carrying oil from several Gulf oil producers, Saudi, Iraq, the UAE and Iran itself, because the US has lifted its blockade on Iranian oil exports. So there have been several cargoes from Iran, including from Karg Island in the past few days. There was a bit of a drop-off on Friday when our colleagues spoke to some seafarers saying they'd been turned back by the Iranian Navy and a bit of a confusion on Saturday when the Iranian military claimed it had closed the strait again. But the numbers over the weekend really undermined that claim. There was actually quite a big increase over the weekend and today a fairly steady flow again.

Alex Ossola (2:29)

What is the kind of balance we're seeing of ships coming versus going?

Joe Wallace (2:34)

It depends on the day, to be honest. I would say more going out than coming in, but there have been a few recent days with quite a few going in.

Towards the end of the war, albeit during the ceasefire, there were quite a few ship owners getting their ships into positions such that they could capitalize on what would likely be a rush to export oil from the Gulf as soon as the war formally wrapped. But now, over the past few days in particular, there have been more coming in than going out. That reflects the demand for oil and refining oil products like diesel, especially in Asia, where, as we know, economies and companies have been scrambling to import fuel from the world over to replace the lost barrels from the Middle East.

Alex Ossola (3:12)

So the demand is most certainly there, as we've covered a lot in the past months. But traffic, it sounds like, isn't quite at the volume yet that it was before the war.

And yet, we're seeing today oil prices are down pretty dramatically. I mean, today, Brent Crude, the international benchmark, is trading under $80 a barrel, which is just a bit above the pre-war levels. What are traders responding to here exactly?

Joe Wallace (3:34)

Yeah, as you say, although there has been an increase in traffic, we still had a fraction of pre-war traffic rates. Analysts have tried to estimate how quickly it will take to clear some of the backlogs and get ships back into the right places around the world. But the best guess is that maybe within a month, assuming there are no more setbacks in the talks, you might get to about 50% of pre-war levels.

Alex Ossola (3:58)

That was WSJ reporter Joe Wallace. Thank you, Joe.

Joe Wallace (4:00)

Thank you.

Alex Ossola (4:02)

In markets today, oil prices fell after the US cleared the way for Iran to sell oil in dollars, adding to investor optimism around peace talks. Major US indexes were mixed. The Dow rose 0.3 percent, while the NASDAQ tumbled 1.3 percent on a choppy day for tech stocks. SpaceX, which makes up about 5 percent of the NASDAQ, fell 16 percent, marking its third straight decline. An even bigger NASDAQ component, Alphabet, suffered its worst day in more than a year, down about 5 percent amid concerns about its artificial intelligence business. The S&P closed down about 0.4 percent.