27JUL

Iran and Oman claim the strait

3 min read

10:27UTC

Sultan Haitham bin Tariq signed a joint statement with Iran's foreign minister in Muscat on 23 June, creating a standing committee to set fees on the Strait of Hormuz, hours after Rubio said Washington will not accept tolls.

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Key takeaway

Iran and Oman signed a Hormuz fee committee the same day Washington said no state may charge.

Iran and Oman signed a joint statement in Muscat on 23 June creating a standing committee between their foreign ministries to administer Strait of Hormuz shipping and determine transit fees "in alignment with international standards" ¹. Sultan Haitham bin Tariq, Omani Foreign Minister Badr Albusaidi, Iran's Foreign Minister Abbas Araghchi and parliament speaker Mohammad Bagher Ghalibaf put their names to it in person. the strait is the 33-kilometre chokepoint through which roughly a fifth of the world's seaborne oil passes, and the question of who may charge to use it has run unresolved since the war began.

The Sultan's personal signature, head-of-state level rather than ministerial, escalates the consultations Baghaei first announced on 18 May into a formal institution with named signatories and fee-determination authority. The founding language, "the sovereignty and sovereign rights of the two coastal nations" ², positions the pair as co-governing authorities over a waterway Washington insists no state may charge to use.

That framing carries weight beyond the rhetoric. A coastal-state body that sets fees pre-empts both the US position and the European multilateral framework drafted at the UK's Northwood Headquarters. It also routes around Iran's own unilateral Persian Gulf Strait Authority (PGSA), the body that mandated transit insurance and reserved fees from 17 August , while Oman simultaneously reaffirmed its backing for the Islamabad MOU and gave Tehran the Arab cover The Gulf monarchies have withheld.

Deep Analysis

In plain English

The Strait of Hormuz is a 33-kilometre shipping lane between Iran and Oman through which roughly one-fifth of the world's oil passes every day. Until now, every country agreed that no single nation owned it; ships could pass freely under international maritime rules. On 23 June, Iran and Oman signed a document creating a joint committee that can set fees for using the strait. They are two of the three countries whose coasts border the strait, so together they claim the right to govern it. This matters because the United States and most shipping nations argue no country can charge for passage through an international strait. If Iran and Oman enforce fees, every tanker carrying oil from the Gulf; including those supplying Europe and Asia; faces a new toll. The US Secretary of State arrived in the region the same day and said America will never pay those fees, leaving a direct standoff between the two positions.

Deep Analysis

Root Causes

The Iran-Oman committee reflects a specific structural gap in the 1982 UN Convention on the Law of the Sea (UNCLOS): transit passage rights through international straits bind the 169 states that ratified UNCLOS, but Iran never ratified it.

Tehran instead relies on its own 1934 and 1959 maritime boundary treaties with Oman, which pre-date the transit-passage doctrine. The 23 June committee grounds its fee authority in those bilateral treaties rather than UNCLOS, giving the arrangement domestic legal standing in both states even if it conflicts with international maritime law as the US and EU interpret it.

Oman's co-signature also reflects the failure of Bessent's 28 May threat to sanction Oman over toll facilitation. Muscat backed down verbally then, but the 23 June signing shows the retreat was tactical: Sultan Haitham waited until the Islamabad MOU gave the committee a treaty hook ('navigation services' charges permitted after 60 days) before committing his personal signature.

Escalation

The committee's signing escalates the Hormuz governance dispute from an IRGC unilateral toll claim to a bilateral state instrument backed by a head-of-state signature. The IRGC's own PGSA is now supplemented, not replaced, by a civilian-diplomatic vehicle. This makes it harder for Washington to dismiss the toll question as Iranian extremism and harder for moderate Gulf states to oppose it without directly challenging Oman.

What could happen next?

Precedent
If no international body invalidates the committee before it begins operating, two coastal states will have established that joint governance of an international strait can override transit-passage norms, creating a template replicable in the Bab el-Mandeb (Djibouti-Eritrea-Yemen) and the Turkish Straits.
Medium term · Reported
Risk
The GCC session in Bahrain on 25 June faces a split between Oman (co-signatory) and the four Gulf monarchies that formally rejected the PGSA in May. Any GCC communique that fails to name the committee risks legitimising it by omission.
Immediate · Assessed
Consequence
Rubio's no-tolls declaration, issued hours after the signing, now requires a concrete enforcement mechanism; either sanctions on Omani toll-facilitation or naval interdiction; neither of which Washington has signalled it will use against a fellow US partner state.
Short term · Reported

Source Landscape

This story draws on neutral-leaning sources

Primary parallel: Britain's 1967 withdrawal from Aden created the same pattern: two adjacent coastal states, Oman and South Yemen (later the PDRY), competed to fill the governance vacuum in The Gulf of Aden straits. Neither could charge tolls because neither controlled both shores.

Iran-Oman bilateral governance replicates that structural template; two states asserting joint authority over a strait where each controls one shore; but with a functioning institutional instrument rather than post-colonial chaos.

Counter-parallel: The 1979 Iranian Revolution's seizure of the US embassy produced a different outcome from the same pattern of bilateral confrontation: Washington imposed sanctions, built a naval coalition, and eventually secured Iran's partial compliance. That precedent suggests unilateral US pressure can outlast bilateral governance claims, but required 444 days and produced no strategic reversal of Iranian policy.

Consensus view: International Crisis Group's Iran analyst Ali Vaez and Chatham House's Sanam Vakil assess the Muscat committee as a structural pivot: for 45 years the strait of Hormuz operated under an implicit international-commons norm, with no coastal state charging for passage. A named bilateral institution with head-of-state signatures converts Iran's unilateral toll claim into a two-state governance demand that Washington cannot dismiss as Iranian unilateralism.

Counter-view: Sharif University's Seyed Hossein Mousavian argues the committee is a defensive hedge rather than an expansionist claim. Tehran's civilian foreign ministry, not the IRGC, drove the Muscat process, and the founding language; 'in alignment with international standards'; is a deliberate signal that Iran seeks treaty legitimacy, not a permanent standoff.

Key tension: Whether Oman's co-signature transforms the toll question from a bilateral US-Iran dispute into a multilateral maritime governance dispute that the International Maritime Organisation and UNCLOS frameworks must adjudicate, rather than one the US can resolve through unilateral sanctions pressure.

First Reported In

Update #137 · Iran and Oman claim the strait; US says no

WANA (West Asia News Agency)· 24 Jun 2026

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Causes and effects

Caused by

Iran claims sole control of Hormuz

The Iran-Oman bilateral fee committee created on 23 June failed to resolve routing disputes, which Araghchi's sole-oversight claim then sharpened.

Occurred 27 Jun 2026

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This Event

Iran and Oman claim the strait

A signed coastal-state fee body outranks a verbal US objection in maritime law, where the first credible framework tends to hold.

Led to

Rubio lands in UAE: no Hormuz tolls

Rubio's UAE no-tolls declaration is a direct response to the Iran-Oman Muscat committee signing, both occurring on 23 June.

Occurred 23 Jun 2026

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Iran and Oman draft Hormuz bilateral

The 23 June signed fee-setting committee escalates the 18 May verbal Iran-Oman maritime understanding into a formal institution with named signatories and fee-determination authority.

Occurred 18 May 2026

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IRGC rejects the Oman Hormuz route

The Iran-Oman Muscat fee committee (23 Jun) prompted the IMO-coordinated toll-free corridor proposal that the IRGC rejected on 25 Jun.

Occurred 25 Jun 2026

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GCC backs free passage, splits on Oman

The GCC-US Manama communique implicitly rejects the Iran-Oman Muscat fee committee (ID:4458) that Oman had signed two days earlier as a GCC member.

Occurred 25 Jun 2026

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Oman's Hormuz fee splits its authors

Oman's formal fee proposal operationalises the joint fee committee the Muscat statement created, immediately splitting the two signatories over its terms.

Occurred 30 Jun 2026

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Different Perspectives

Asian buyers (India, Japan, China, South Korea)

Asian refiners are absorbing 62% of Yanbu's 3.75m b/d flow, the bulk of Saudi Arabia's rerouted crude now clearing east rather than into the Atlantic basin. That destination split leaves Asian buyers more exposed to any single Yanbu-specific disruption than under the kingdom's normal multi-terminal export pattern.

Russia / Lukoil

Moscow loses the roughly $14-a-barrel legal headroom the frozen price-cap formula would otherwise have released toward $58, even as Urals trades below Russia's own $59 budget floor. The shadow-fleet insurance workaround the freeze leaves untouched remains the actual route sanctioned crude clears above $44 in practice.

European Union / Council

Brussels adopted its 21st sanctions package on 23 July, letting boarding states confiscate and sell shadow-fleet cargo outright and freezing the G7 price cap's automatic adjustment to mid-2027, converting indefinite tanker storage into recoverable value for enforcers.

Freight and tanker desks

The Baltic Exchange's TD3C VLCC benchmark, most desks' reference for Gulf freight, prices a single-vessel voyage while Saudi shippers now pay for two Suezmax charters at roughly double the transit time. That gap leaves any book hedged purely on TD3C carrying unrecognised Suezmax basis risk on the bulk of Saudi rerouted volume.

Mediterranean refiners (Sines, Trieste, Augusta)

Refiners already facing aframax rates up 198% month-on-month now watch Ain Sokhna draw 23% of Yanbu's rerouted crude through the same SUMED corridor they lean on for product backfill. Fujairah and ARA stocks near record lows leave little room to absorb a thinner Suez product flow.

Saudi Arabia

Riyadh has rerouted its entire western-coast crude book through Yanbu and Suez since the 23 July Bab el-Mandeb embargo, absorbing a roughly $2m-per-voyage Suezmax premium on every diverted cargo. The kingdom's fiscal breakeven near $108 a barrel makes that freight cost, not the blockade itself, the more durable drag on export economics.