Strait of Hormuz payments raise oil market concerns

Oman’s reputation for neutrality has earned it the nickname “Switzerland of the Middle East.”

But the country, which sits south of the Strait of Hormuz, is using a deliberately vague communications strategy in negotiations over the tolling of the vital waterway, and markets have a “blind spot” for what might happen next, analysts told CNBC.

Oman has acted as an important mediator in the region’s problems and remains one of the few countries trusted by Tehran and Washington, which is determined to ensure that the flow of the strait resumes after it was blocked during the war, which caused the collapse of energy around the world.

Located on the southeastern coast of the Arabian Peninsula, opposite Iran across the river, Oman has been in joint talks with Iran on a new maritime security order, amid reports that the two countries may force the establishment of a transit fee.

Oman has said any deal would be in line with international law, although the prospect of a financial system in the waterway that normally carries around 20% of the world’s oil has sparked an uproar.

Analysts told CNBC that Oman’s ability to charge service fees remains within strict legal limits, given that the limit is governed by the principle of transit, which does not allow countries to charge ships when they transit. Service charges, however, may be one way to avoid this.

Dania Thafer, executive director of the Gulf International Forum, a think tank in Washington, DC, said Oman’s position on the toll or toll system is probably being deliberately vague.

“You have a regional power, like Iran, and then you have a global power, the US, putting pressure on Oman,” Thafer told CNBC in a phone interview.

“Therefore, they are trying to use a degree of strategic ambiguity to try to get out of the conflict as much as possible and not underestimate these very powerful players.”

If Gulf countries and key international actors greenlit Oman, Thafer said the country could move forward with a type of money service system in the Strait of Hormuz.

He added that although it would be seen as a political embarrassment for the toll to come into effect, the markets would “react appropriately” to conditions that would allow for the safe passage of ships.

A spokesman for Oman’s Ministry of Foreign Affairs could not be reached for comment when contacted by CNBC.

The US is strongly opposed to any tolls in the Strait of Hormuz.

In the past, the administration of US President Donald Trump has threatened “violence” to impose sanctions against Oman if it appears to be helping Iran establish a tariff system.

“All nations must reject any attempt by Iran to disrupt the free flow of commerce,” Treasury Secretary Scott Bessent said in an email on May 28.

Under the terms of the US-Iran memorandum of understanding, signed on June 17, Tehran cannot charge the ships during the 60 days of talks to find a permanent solution.

Iran, however, is determined to win international recognition for its control of the Strait of Hormuz, Reuters reported on Wednesday, citing two senior Iranian sources. This includes the ability to charge tolls on ships entering and leaving the Gulf, the report said.

Andrew Leber, a non-resident scholar at the Carnegie Middle East Program, said Oman’s reputation as an arbiter had left it “caught” between Tehran’s demands for tariffs and US demands that this not happen.

“As a result, we’ve seen Omani diplomats go back and forth between insisting that no tolls will be imposed, and suggesting that ships could be asked to pay something other than a toll,” Leber told CNBC in an email.

The challenge for Oman, Leber said, is that its geography means that it has a direct hand in what is happening in the Strait of Hormuz. The country has security reasons and a financial interest in complying with Iran’s plan or levying some kind of fee, he added, as long as Oman also gets a cut.

“It is very likely that Oman will continue to sign some kind of Iran service fee arrangement or resolve it to the extent that it puts it at odds with its Arab neighbors or the United States,” Leber said.

Neil Quilliam, an expert in energy policy, geopolitics, and foreign affairs specialist who focuses on the Middle East and North Africa at Chatham House, said that the combination of geography and diplomacy gives Oman influence over the laws, processes and future plans governing the Strait of Hormuz.

“Markets tend to be sensitive to price disruptions but ignore management risks. That creates a blind spot,” Quilliam told CNBC via email.

“Changes in the way the Strait is managed, even if it is slow and negotiated, could change costs, compliance requirements, and insurance capabilities without a dramatic safety event,” he added.