NextFin News - The United Nations' maritime chief says the Strait of Hormuz is not open and no mines have been confirmed cleared, directly contradicting US President Donald Trump's claim that Washington has "total control" of the waterway and that oil is flowing freely. "Until we have confirmation of demining and security that the vessels are not going to be attacked, I will not call for anyone in the area to take the risk to transit," Arsenio Dominguez, secretary-general of the International Maritime Organization, told a television interview on Thursday. The clash between the world's most powerful navy and the UN agency that certifies global shipping safety is now the single most important variable in the oil market, and the market is siding with the certifier.
The Claim and the Contradiction
The two narratives could not be further apart. On his social media platform on August 12, Trump wrote: "The U.S.A. has total control over the Strait of Hormuz. I THINK WE WILL KEEP IT!" He described the US naval blockade as a "WALL OF STEEL" that Iran could not challenge, adding that Iran had "no Navy," "no Air Force," "no money" and a decimated military. A week later, speaking at the White House on August 19, he offered a second, slightly different claim: "Right now, the strait is open. A lot of boats are coming through. We are getting a lot of oil out."
The IMO's position, delivered by its secretary-general in a televised interview, rejects both. On the first claim — control — the agency has consistently maintained that no country has the legal right to blockade an international strait or impose tolls on passage. On the second — that the route is operationally open — Dominguez said there is no confirmation that mines have been removed and no security guarantee that vessels will not be attacked. His condition is explicit and narrow: demining verified, security guaranteed, then and only then will he advise ships to transit.
The agency has gone further, urging all stakeholders to "remain vigilant against disinformation and to rely only on verified, authoritative sources when making navigational decisions." Read alongside the administration's public reassurances, the statement is a diplomatic rebuke in institutional language. The IMO is not an adversary of the United States; it is a UN specialized agency headquartered in London whose members include the US. When it declines to certify a route a president has declared open, the silence carries more weight in a chartering office than any press conference.
The stakes define why this matters beyond a war of words. Before the war, about 20 million barrels a day of crude and refined products — roughly a fifth of global oil consumption — moved through the strait, along with a significant share of the world's liquefied natural gas from Qatar. Every barrel that does not flow is a barrel the market must find elsewhere, and every vessel that stays at anchor is a vote against the "open and operating" narrative.
What the Data on the Water Actually Shows
The ground truth in the strait is measurable, and it does not match the administration's claims. Observed ship traffic through Hormuz stood at a five-day average of about 10 crossings, the lowest level since May 11, according to an analysis of data from trade intelligence firm Kpler. Before the war, about 130 vessels crossed the strait daily. In the days surrounding the report, traffic ran at 10 crossings on Monday and two transits on Sunday. A route operating at roughly 8% of its normal vessel count is not, by any operational definition, open.
Attacks continue to land. On August 18, a ship came under fire while exiting the strait, resulting in one casualty, according to maritime security agencies. The UK Maritime Trade Operations Centre, the official body that issues navigational warnings for the region, said a bulk carrier was hit by an unknown projectile. Through June 8, the centre had logged 54 reports of incidents affecting vessels in the Mideast Gulf, the strait and the Gulf of Oman since the conflict began on February 28.
Flow estimates from independent firms also sit far below US official claims. Energy Secretary Chris Wright said oil exports through Hormuz had reached a seven-day average of nearly 9 million barrels a day. But vessel information firm TankerTrackers.com said on August 20 that only 5 million barrels a day were departing the US Navy blockade line — and noted that figure likely includes loadings at UAE and Omani ports in the Gulf of Oman, beyond the strait itself. Michelle Wiese Bockmann, a maritime intelligence analyst at Windward, put crude exports through the strait at about 5 million barrels a day in July, up from about 4 million in June and 1.6 million in May. That is a recovery, but it is still a quarter of the pre-war volume.
"Transits have scaled up very quickly against a backdrop of extreme risk," Wiese Bockmann said.
The trajectory matters as much as the level. A fourfold increase from May to July shows the US-escorted southern lane is moving crude. But a plateau at 5 million barrels a day, three months into a US military escort operation, shows the ceiling imposed by risk rather than capacity. The tankers, the buyers and the loading terminals all exist; what is missing is the confidence to run them at pre-war tempo.
Why the Credibility Gap Itself Moves the Oil Price
The first-order effect of the exchange is a political dispute: one side says the route is safe, the other refuses to certify it. But the second-order mechanism is what actually prices crude. In shipping and energy markets, the marginal decision-maker is not the politician making the claim. It is the shipowner signing the charter, the underwriter writing the war-risk policy and the trader booking the cargo. Each of them prices the worst case, because each of them bears the loss if the worst case arrives.
That asymmetry makes the credibility gap self-reinforcing. When a government declares a route safe but the UN maritime regulator will not certify it, the regulator's refusal is the louder signal. Insurance underwriters do not underwrite against a press conference; they underwrite against the probability of a total loss. A single successful strike on a vessel that had been told the route was open would validate the worst fears and could clear the strait faster than any official statement has filled it. Shipowners, knowing this, will not run vessels into a corridor the certifier has flagged — not because they disbelieve the president, but because their insurers will not cover the exposure.
This is why the oil market has not taken the administration at its word. Brent crude rose to $93.30 a barrel on August 20, up 1.83% from the previous day and up 37.87% year over year. West Texas Intermediate traded near $86. The premium embedded in those prices is not merely payment for barrels lost today; it is the option value of disruption tomorrow. Goldman Sachs has said Brent could surpass $120 a barrel in the fourth quarter if flows through the strait remain disrupted and Gulf output only fully recovers by the end of 2027 — a reminder that the market is pricing a long tail of risk, not a near-term normalization.
The International Energy Agency, in its August oil market report, cut its global oil demand forecast by roughly 550,000 barrels a day for the second half of 2026, citing the continued closure of the strait and elevated fuel prices. It now expects global oil demand to contract by 1.6 million barrels a day in 2026, with supply forecast to fall 4.3 million barrels a day to 102 million barrels a day. The agency's demand destruction is the second leg of the same mechanism: high prices are not just rationing supply, they are rationing consumption.
Cyclical Disruption, Structural Risk Premium
Is this a cyclical interruption that will mean-revert once a deal is signed, or a structural shift that will not? The answer is both, and the distinction decides how long the premium lasts.
The cyclical leg is real and already visible. Flows have climbed from 1.6 million barrels a day in May to about 5 million in July as the US military has escorted vessels through a southern route along Oman's coast. A verified demining operation, a security framework and a political settlement would restore volumes quickly — the infrastructure, the tankers and the buyers are all still in place. The June 17 memorandum of understanding between Washington and Tehran was meant to open the strait; it expired on August 18 without a final deal, but the framework it outlined shows the disruption is negotiable. On that measure, the interruption is mean-reverting.
But the structural leg is what the market is beginning to price, and it is the more consequential call. The conflict has demonstrated that a chokepoint carrying a fifth of the world's oil can be weaponized by a regional power, and that "control" of an international strait is contestable even by the world's largest navy. The IMO-designated traffic separation scheme — the internationally recognized shipping lanes that have governed passage through the strait since the late 1960s under the Convention on the International Regulations for Preventing Collisions at Sea — has been reported to contain mines, and the agency's own operational guidance says the scheme should not be used. Once the precedent is established that a major energy artery can be closed, mined and re-opened at the discretion of a belligerent, insurers and traders will not fully unprice the risk even after the last mine is swept.
The legal architecture underscores the point. The IMO has stated that the rights and freedoms of navigation embodied in the United Nations Convention on the Law of the Sea and customary international law remain in force regardless of the conflict. Yet the reality on the water has been shaped by force rather than law: Iran demanding that vessels coordinate passage through its waters or risk attack, and the US imposing a naval blockade and proposing a 20% charge on cargo. When international law becomes a background reference rather than the operating rule, the risk premium becomes structural.
So the cyclical call is that volumes recover; the structural call is that they recover at a higher cost of carriage. Freight rates, war-risk insurance and routing delays embed a permanent tax on Gulf crude that did not exist before February. That is why the market can rally on a deal and still hold a higher floor than the pre-war benchmark.
The Strongest Case Against This Reading
The counter-thesis is straightforward, and it has data behind it. Volumes are recovering — July's 5 million barrels a day is more than triple May's 1.6 million, and the US-backed southern lane is demonstrably moving crude. Energy Secretary Wright's figure of nearly 9 million barrels a day on a seven-day average, if accurate, would show a much faster normalization than independent trackers capture. From this angle, the IMO's caution reflects institutional risk-aversion and a liability posture — the agency that paused its own evacuation plan after an attack has every incentive to speak conservatively — rather than the operational ground truth.
There is also a sampling problem. Some tanker traffic moves with automatic identification systems switched off, visible only to satellite imagery, which means official trackers may undercount covert transits. US officials have argued that private firms undercount ships leaving the strait precisely because vessels are moving quietly. If the true flow is closer to 9 million or 10 million barrels a day than to 5 million, the "open and operating" claim is substantially correct, and the risk premium should compress as volumes climb toward 8 million to 10 million barrels a day.
That argument is strongest on one condition: that the recovery continues uninterrupted. But it rests on an assumption the IMO has explicitly refused to make — that the security environment is stable enough to predict. One successful attack on a US-escorted convoy, or confirmed evidence that mines remain in the traffic separation scheme, would reset the calculus instantly. The counter-thesis also depends on Iran's continued restraint, a variable that has not been reliably present since the war began. And it must explain why Brent, which settles on physical barrels, is trading near $93 rather than pricing in a 9-million-barrel reality.
What to Watch Next
The forward picture splits cleanly by time horizon, and each horizon points in a different direction. In the short term, sentiment and liquidity dominate: any verified demining announcement or a renewed US-Iran deal would pull the risk premium out of crude quickly, and Brent could give back a meaningful share of its 37% year-over-year gain. In the medium term, fundamentals matter more — whether monthly export volumes can sustain a climb above 5 million barrels a day without another casualty event, and whether the June 17 framework can be resurrected after its August 18 expiration. In the long term, the structural question decides the floor: whether the market accepts a permanently higher insurance and routing cost for Gulf crude, which would keep the Brent floor elevated even in peace.
Three signals would falsify the view that the credibility gap is durable. First, average daily transits sustained above 65 — half of the pre-war rate of about 130 — for two consecutive weeks. Second, crude exports through the strait above 12 million barrels a day, two-thirds of the pre-war flow, confirmed by at least two independent tracking firms. Third, and most important, the IMO resuming its evacuation framework and certifying that demining in the traffic separation scheme is complete. The agency evacuated 136 vessels and about 2,900 seafarers between June 23 and June 26 before pausing the plan after an attack; roughly 20,000 seafarers remain impacted in the region. Its return to operations would be the single strongest evidence that the route is genuinely safe.
Until at least two of those three signals print, the agency's position is the one the market will trade against. The administration is selling certainty about a route the UN will not certify. In the Strait of Hormuz, the market prices the certifier, not the claim.
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