How Iran's Proposed Shipping Lanes Could Change the Strait of Hormuz

The status of the Strait of Hormuz has changed, perhaps forever.

To show you why and how that matters, I need a different map,

and I need a larger desk.

OK, we have a larger desk, and now let me get the proper chart.

This is an article chart, Industry Standard, UK Admiralty.

If you were on the bridge of one of the oil tankers

inside the Persian Gulf, probably you

will be looking exactly at this map.

Persian Gulf and the Strait of Hormuz

is critical for global energy supply.

Around 20% of the world's oil comes

through the Strait of Hormuz.

Around 25% of the world's LNG, liquefied natural gas,

also comes through the Strait of Hormuz.

Let me show you why it's critical

and how narrow it is at the narrowest point, which is here.

We have Iran to the north, Oman to the south.

And although the Strait looks a bit wider,

in reality, what matters is this area here.

This is the traffic separation scheme,

sort of a highway inside the sea.

This is the lane that goes into the Persian Gulf.

This is the lane that comes out of the Persian Gulf.

And in between is a buffer area, which is shaded.

Each of these lanes is about two miles wide.

It is very, very narrow at that point.

And now the United States and Iran

are fighting for who and how that's going to be controlled.

Since the beginning of the war, the Strait has been closed.

And on social media, the Iranian Supreme Leader Ayatollah Khamenei

and the President of the United States, Donald Trump,

are fighting about what's going to happen next.

My belief is that the status of the Strait

will change during the negotiations.

Because at the moment, very little

is flowing through the Strait.

And the Iranians are suggesting that things

need to change immediately.

They have distributed this map.

Sorry, they have issue only on black and white.

It shows here, it's a close-up of the area

that I was showing you earlier.

This area here is what I have now magnified on the screen.

Oman is here.

This is the Iranian coast.

And all shipping lanes are here, in blue, in and out.

What the Iranians are telling the industry

is that this area should not be used, because there is danger.

They have been planting anti-ship mines.

And therefore, it needs to be avoided.

What they are suggesting instead is a new area of shipping lanes

to the north, and a lot closer to the Iranian coast.

One lane to get out, and one lane

to come into the Persian Gulf.

It comes remarkably close to the Iranian coast,

very close around Larak Island, which for many in the industry

could become a new kind of control point for the Iranians

to exert more influence on this Strait.

The crucial point here is that this whole area that

has been in use for 50 years was fully

inside Omani territorial waters.

This new area that the Iranians are suggesting

is full in Iranian territorial waters.

And that really matters, because what

we are seeing at the moment, if I go to my Bloomberg screen,

is that very little is moving.

Some Iranian ships have crossed over the last few days,

but most ships remain at anchor inside the Persian Gulf.

All of them, but this small group here,

these are mostly Chinese flag oil tankers.

And they came from inside the Persian Gulf.

They have congregated in this area.

They have dropped anchor.

And they seem to be waiting for something to happen,

probably prepared to cross.

The challenge now is how to square the circle

over the Strait of Hormuz.

How to allow that both the United States and Iran

say that they got what they wanted.

And how to go from this new situation to the old one.

That will be coming through diplomacy,

through negotiation.

But I don't think that we will ever

see the Strait of Hormuz exactly as it was before the war,

but perhaps not as controlled as it is by now by Iran.