Nine Million Barrels a Day Are Moving Through Hormuz Without Any Deal

American figures put roughly 9 million barrels a day now transiting the Strait of Hormuz, with military escort capacity expanding. In July the transit count was running about 90 percent below its year-earlier level, and on the 11th of August only six vessels went through against a recent average of eleven. The waterway is reopening by force of convoy rather than by agreement.

The agreement, meanwhile, has terms that explain why it has not been signed. Iran says it reached an accord with Oman on the 7th of August that bans United States and Israeli vessels from the strait entirely, imposes fines of up to 20 percent of cargo value for violations, and denies passage to any country or individual it holds responsible for damage to Iran until war reparations are paid.

Iran would also take responsibility for navigation guidance, vessel traffic monitoring, maritime security and environmental protection, with fees based on what it describes as a combination of many variables. Earlier drafts had Tehran seeking 5 to 7 percent of cargo value while Oman proposed about 3. The whole package is conditional on Washington ending its blockade of Iranian ports.

Oman itself has not publicly commented on any of it. Neither have the UAE, Bahrain, Kuwait, Saudi Arabia or Qatar, all of which had previously rejected Iranian control of the strait outright. That silence is the loudest thing in the story. A transit regime for a waterway carrying about a fifth of the world's oil exports cannot function if the Gulf states on the other side of it will not acknowledge it exists.

So two systems are now running in parallel. One is a negotiated framework that gives Iran authority, revenue and an effective veto over American shipping, and that nobody except Iran has confirmed exists. The other is a convoy operation moving 9 million barrels a day under naval escort, which concedes nothing to anybody and appears to be working.

Markets have noticed which one is real. Brent is at 87.15 dollars and barely moved on the day, having closed at 100.69 as recently as the 23rd of July. The IEA and OPEC both cut their demand forecasts this week and US crude stocks rose 17.4 million barrels in a single week. Whatever eventually gets signed in Muscat, the barrels have already found their way around it, and a price that stops responding to a negotiation is telling you the negotiation stopped mattering.