Diplomatic progress prompts cautious resumption of Hormuz transit

The tentative reopening of the Strait of Hormuz has allowed critical LNG and crude tankers to resume transit amid progressing US-Iran diplomatic negotiations.

WHAT: Shipping traffic has increased through the Strait of Hormuz following a severe maritime blockade.

WHY: Speculation over a proposed bilateral memorandum of understanding has temporarily eased intense regional hostilities.

WHAT NEXT: Markets await structural de-escalation while European utilities continue aggressively diversifying their infrastructure portfolios.

Commercial shipping traffic is slowly returning to the Strait of Hormuz, with liquefied natural gas (LNG) carriers and crude supertankers successfully navigating the contested corridor.

The tentative resumption of physical commodity flows follows mounting speculation of a diplomatic breakthrough between Washington and Tehran, offering a potential reprieve for global markets severely distorted by the ongoing conflict.

Traffic resumes, in part

According to vessel tracking data provided by LSEG and Kpler, two heavily laden LNG tankers traversed the critical maritime chokepoint over the weekend. Reuters reported on May 25, 2026, that the Bahamas-flagged LNG carrier Fuwairit, which loaded at Qatar’s Ras Laffan terminal in late March, crossed the strait and was scheduled to discharge its cargo in Pakistan on May 26, 2026. A second vessel, the Al Rayyan, also loaded Qatari volumes and is currently en route to China, with delivery expected in late June.

These specialised gas carriers were accompanied by a small convoy of crude tankers. Shipping data confirmed that three Very Large Crude Carriers (VLCCs), carrying a combined 6mn barrels of oil, successfully sailed through the designated transit route towards buyers in China and South Korea.

The successful passage of these vessels marks a significant shift on the water. The US-Israeli conflict with Iran, which commenced on February 28, 2026, had effectively paralysed the waterway. Prior to the outbreak of hostilities, the Strait of Hormuz routinely handled between 130 and 140 transits per day, serving as the primary export artery for approximately 20% of global oil and LNG supplies. Following the Iranian Revolutionary Guards’ decision to assert strict military control over the conduit in early March, daily transits collapsed. For several weeks, fewer than 10 commercial ships were permitted to pass daily, with the vast majority possessing overt links to Tehran.

The near-total closure inflicted profound damage on the global hydrocarbon balance. Stripped of their primary export route, major OPEC producers – including Saudi Arabia, Iraq, the UAE and Kuwait – were forced to curtail operations. This logistical bottleneck caused broader OPEC oil production to plummet by roughly 7.9mn barrels per day in March, representing a decline of more than 27%. Notably, Iran remained the only major member of the cartel whose upstream output was largely unaffected during the escalation.

Sanctions relief

Daily crossings have surged to more than 30 vessels in recent days. This increase in traffic appears directly correlated to back-channel geopolitical negotiations that could see the blockade lifted entirely.

According to a May 24, 2026, report by the semi-official Tasnim News Agency, a Pakistan-mediated memorandum of understanding (MoU) is currently being drafted by US and Iranian officials. The proposed framework is designed to end the immediate hostilities and establish a foundation for a lasting peace agreement.

Under the terms of the draft MoU, Washington would temporarily waive its stringent sanctions on Iran’s oil, petroleum products and petrochemical exports. These sanctions have severely restricted Iranian trade since 2018, when the US unilaterally withdrew from the Joint Comprehensive Plan of Action. Citing an unnamed US official, Axios reported that the memorandum would remain valid for an initial 60-day period and could be extended pending mutual agreement.

In exchange for the sanctions relief, the US would lift the aggressive naval blockade it imposed on Iranian ports on April 13, 2026. This would theoretically allow Tehran to freely market its crude globally. The agreement also stipulates a normalisation of traffic through the Strait of Hormuz. While Axios indicated the waterway would fully reopen, domestic Iranian messaging remains cautious. Tasnim denied that the operational environment would immediately revert to pre-war conditions, noting that while the volume of transiting vessels is expected to return to historical levels, Tehran will maintain the strict exercise of its sovereign rights over the conduit.

The prospect of a diplomatic resolution has already triggered a sharp recalibration across global commodity exchanges. Hopes that the US and Iran will finalise the pact pushed spot prices significantly lower, unwinding much of the geopolitical risk premium accumulated over the past three months. Global benchmark Brent crude fell 5.5% to settle at $97.90 a barrel during Asian trade on May 25, 2026. Before the conflict erupted in February, Brent crude traded near $70 a barrel. The subsequent collapse of regional shipping systematically drove prices above the $100 threshold, with severe volatility pushing the benchmark as high as $110 during the peak of the naval blockades.

Lingering supply shocks

While the spot market has retreated on the prospect of returning Iranian barrels and restored Qatari LNG flows, the structural damage inflicted upon European utility portfolios continues to mount. The backlog of disrupted cargoes means that even if the Strait of Hormuz reopens fully this week, supply chain issues will persist into the third quarter. For any utility CEO navigating the current macroeconomic environment, the crisis underscores the fragility of relying on a single maritime chokepoint.

This reality was starkly highlighted on May 26, 2026, when Edison announced it had received a further extension of a force majeure notice from QatarEnergy. The ongoing disruption covers an additional five LNG cargoes originally scheduled for delivery to the Adriatic LNG terminal between July and mid-August 2026. The latest extension brings the total number of disrupted Qatari shipments to 17, representing a formidable volume of approximately 2.2bn cubic metres of stranded natural gas.

Since receiving the initial notification from the Qatari state-owned major in early March 2026, Edison has been forced to aggressively restructure its procurement strategy to replace the lost volumes while maintaining its delivery slots. As of May 25, 2026, the Italian energy group reported that it has successfully replaced nine of the 17 affected cargoes, securing approximately 1bcm of natural gas from alternative sources.

The company confirmed that it does not anticipate any material impact on its end customers, attributing this insulation to prompt mitigation measures and sophisticated portfolio management activities. The scale of the disruption serves as a severe stress test for Edison’s long-term procurement frameworks. The utility holds a cornerstone contract with QatarEnergy for the supply of 6.4bcm of gas per year to Italy. The agreement, which has been in force since 2009 and carries a 25-year duration, is foundational to Italian energy security. Edison noted that its last received cargoes from Qatar date back to the end of March 2026, following a first quarter in which it successfully imported a total of 1.6bcm of natural gas.

Mediterranean pivot

The unreliability of Gulf supply routes over the past quarter has sharply accelerated European efforts to secure alternative pipeline and LNG infrastructure. In a move designed to permanently bypass the volatility of Middle Eastern shipping lanes, European energy groups are increasingly pivoting toward the Eastern Mediterranean and North Africa.

On May 22, 2026, Turkey's state energy company BOTAS announced it had signed a memorandum of understanding with Edison to explore potential options for broad co-operation in natural gas and LNG markets. Under the terms of the arrangement, the two entities will establish a joint working group to assess the technical, commercial and regulatory viability of a new natural gas interconnector between Turkey and Italy. Crucially, the planned infrastructure is being designed to be fully hydrogen-compatible, reflecting a strategic alignment with long-term European decarbonisation mandates.

BOTAS described the agreement as a strategic partnership that will make a meaningful contribution to the development of both nations, enhance Mediterranean basin connections and reinforce regional energy supply security. For Italy, establishing a robust link to the Turkish grid provides direct access to Caspian and Middle Eastern piped gas, circumventing the need for seaborne LNG transit through contested waters.

Turkey itself is steadily constructing a highly diversified portfolio of new LNG suppliers while simultaneously anchoring relationships with established partners. Earlier this month, Ankara said it was seeking to renew its long-standing LNG agreement with Algeria before the current supply contract expires in September 2027. The foundational gas supply agreement between BOTAS and Algeria’s national oil and gas firm, Sonatrach, was initially signed in 1988 and has been systematically extended ever since, providing Turkey with a reliable, non-Gulf baseload.

For the international energy sector, the immediate focus remains squarely on the Strait of Hormuz and the physical vessels navigating the passage. If the nascent diplomatic agreement holds, the current trickle of LNG carriers and VLCCs exiting the Persian Gulf could rapidly scale up, normalising global supply. Yet the severe supply shock of the past three months has fundamentally altered European procurement strategies, ensuring that investments in alternative Mediterranean corridors will proceed regardless of the ultimate diplomatic outcome in the Gulf.