Key Takeaways
The United States and Iran may reach an agreement to extend the 60-day truce, although it is tentative and subject to approval by President Donald Trump.
News of a pending relaxation of tensions in Persian Gulf energy flows drove Brent oil prices to $91 a barrel, giving world markets some hope of economic relief.
Details remain sketchy, but would preclude Iranian tolls on traffic in the Strait of Hormuz, with a gradual, responsive lifting of the U.S. blockade on Iranian ports.
Under the agreement, Iran is required to remove the mines it placed in the Strait within 30 days.
Negotiations would continue on Iran’s nuclear weapons program, with Iran agreeing to stop its pursuit.
U.S. sanctions and other measures would be reduced in tandem with progress by the Iranians in adhering to the tenets of the tentative deal and in ongoing talks.
The United States and Iran reached a tentative agreement at the end of May to extend their ceasefire by 60 days and continue negotiations over Iran’s nuclear program, pending President Donald Trump’s approval. The tentative agreement resulted in lower oil prices as traders responded to the prospect of reduced disruption in the Strait of Hormuz. Brent crude oil, the international benchmark, dropped to around $91 a barrel, on pace for its biggest monthly decline since 2020. According to the memorandum, Iran will not be able to impose tolls on the Strait of Hormuz and must remove all mines from the waterway within 30 days. The United States would gradually lift its naval blockade of Iranian ports in proportion to the restoration of commercial shipping and would also relax some sanctions on Iranian oil sales. The agreement is to include an Iranian commitment not to pursue a nuclear weapon, to negotiate over suspending its uranium enrichment program, and to remove its stockpile of highly enriched uranium.
As part of the negotiations, the United States will commit to discussing sanctions relief and the release of frozen Iranian funds. The agreement will also include a discussion of a mechanism to help Iran start receiving goods and humanitarian aid. It would also state that the war between Israel and Hezbollah in Lebanon would end, which is still a contentious issue for Israel, with Hezbollah acting as a proxy for Tehran
If it becomes clear during the negotiations that Iran is unable to deliver on the nuclear issue, President Trump will have both economic and military options at his disposal. The withdrawal of U.S. forces deployed to the region is contingent on a final agreement with Iran. It is possible the deal may not last the full 60 days if the United States believes Iran is not serious about the nuclear negotiations. The United States believes that Iran’s economic woes provide an incentive to reach a full deal to remove sanctions and unfreeze its funds.
Iran has 440.9 kilograms (972 pounds) of uranium that is enriched up to 60% purity, a short step from weapons-grade levels of 90%, according to the International Atomic Energy Agency. Iran has not publicly committed to giving up its uranium stockpile, which is believed to be buried under a trio of nuclear sites that were badly damaged by U.S. airstrikes last year. China or Russia could be a potential third party to take possession of the enriched uranium, but President Trump is not comfortable with such a plan.
Iran is letting more commercial vessels pass the Strait of Hormuz — about two dozen daily in recent days, compared with more than 100 a day before the war, but significantly more than in the recent past. It is estimated that 534 vessels have passed through the strait from the start of hostilities on February 28 through May 4, with many of those ships believed to have carried Iranian oil. M In normal times, an estimated 6,500 to 8,450 ships would have transited the strait during the same period. Insurance rates for ships have shot up from 1% of the ship’s goods up to as much as 10%. According to the U.S. military, 1,550 vessels, from 87 countries, are currently stranded in the Persian Gulf.
Iran has charged tolls for at least some of the ships passing through the strait, having set up a formal gatekeeper agency earlier in May that spurred a new round of U.S. sanctions. The sanctions target Iran’s Persian Gulf Strait Authority and any person or entity cooperating with the agency that approves transit in the strait and charges tolls that have reached as high as $2 million per vessel. Collecting tolls in the strait violates a principle of international maritime trade: freedom of peaceful navigation. It was codified by the United Nations’ Convention on the Law of the Sea, which took effect in 1994.
Iran’s paramilitary Revolutionary Guard has indicated that the only safe route for transit through the waterway is through the corridor it has designated and that any ships deviating from that path face a series of attacks and risks. A majority of the ships that have passed through the strait in recent weeks have headed east, out of the Gulf; Iran-affiliated ships, by ownership or flag registration, accounted for 24% of transits, Greece 18%, and China 10%. On closer examination, however, vessels connected to Iran accounted for 60% of transits during the first part of the war and in the last few days, around 90%.
Analysis
A tentative agreement between the United States and Iran has been reached, pending President Trump’s approval. It calls for the opening of the Strait of Hormuz, Iran removing mines in the strait within 30 days, no tolls on ships, Iran’s commitment not to pursue a nuclear weapon, and negotiations to follow on Iran’s nuclear program, including the removal of its uranium stockpile. The United States will gradually remove its blockade of Iranian ports and relax some sanctions, with the removal of all sanctions and the unfreezing of Iranian funds as part of the negotiations. If Iran chooses to renege during the 60-day ceasefire, President Trump has the option to return to economic and/or military action. U.S. troops will not be withdrawn until a final peace deal is made.
