Strait of Hormuz Crisis: Can the Iran MoU Return?

Iran Reopens the Door to the MoU: Is the Strait of Hormuz Crisis Entering a New Phase?

It has been over six months since the beginning of the war in Iran, which commenced after the United States and Israel launched strikes against Iran on February 28. Following promising peace talks in May and June, relations between the United States and Iran deteriorated in July and August, with renewed attacks and severe restrictions on shipping through the Strait of Hormuz.

However, the diplomatic picture may be shifting. On September 1, Iranian President Masoud Pezeshkian said that Iran was prepared to once again agree to the terms of the Memorandum of Understanding (MoU) reached with the United States in June, aimed at ending the war, so long as the United States returns to its commitments.

Pezeshkian’s statement does not amount to a diplomatic breakthrough, particularly because Washington has not indicated that it is prepared to return to the June framework. But it does reopen a path that both sides had abandoned only weeks ago. As examined in SHALE Magazine’s August cover story, The Great Energy Realignment: AI, Hormuz and Energy Security, the struggle over the Strait of Hormuz has become part of a broader restructuring of global energy security and trade. The question now is whether Iran’s renewed interest in the MoU could begin to reduce that pressure—or whether the agreement remains politically out of reach.

A Potential Turning Point: The Promise and Breakdown of the MoU

On June 17, Iran and the United States signed a 14-point MoU outlining a ceasefire extension and initiating a 60-day period for negotiations aimed at ending the war, which commenced in February. The MoU was brokered by Pakistan and Qatar following extensive peace negotiations.

The MoU required that Iran clear the Strait of Hormuz—a key energy trade corridor connecting Europe and Asia—of mines and allow tankers to pass during the established period. In the long term, the MoU states that Tehran “shall not procure or develop nuclear weapons.” Meanwhile, the United States agreed to end its naval blockade, lift sanctions, issue waivers for Iranian oil exports, and start mapping out an economic reconstruction package of at least $300 billion for Iran.

At the time, a senior U.S. official said that “If Iran actually does all the things that they’re telling you…that would be a home run deal.”

However, the ceasefire did not last long. Within a week of signing the MoU, the U.S. and Iran began exchanging strikes after Tehran attacked commercial shipping in the strait. This led to the rapid breakdown of the MoU in July, with President Trump declaring the agreement void on July 7.

Each side began to blame the other. “America’s commitment to the document signed by the president of that country lasted less than two weeks, and that country’s excessive demands and reneging on its commitments began, which still continues,” Pezeshkian said, according to IRNA.

Meanwhile, Iran’s Foreign Ministry spokesman Esmaeil Baghaei believed that the U.S. “broke its promises” under the MoU.

However, in late June, the then-White House Press Secretary, Karoline Leavitt, stated, “As far as we’re concerned, we’re holding up our end of the ceasefire.” Leavitt added, “Violence will be met with violence. There were attacks on commercial vessels that the United States of America, directed by the President, responded to and that will continue to happen.”

The Breakdown of the MoU and Renewed Strikes

Renewed attacks commenced just over a week after the signing of the MoU due to conflicting interpretations of the agreement, particularly over the Strait of Hormuz.

On Thursday, June 25, an Iranian projectile hit a Singapore-flagged cargo vessel traversing the strait. Tehran’s recently established Persian Gulf Seaways Management Organization said, at the time, that according to the MoU, only vessels traveling on designated routes would be guaranteed safe passage and emphasized that coordination with the IRGC navy was “mandatory” for transit through the waterway.

This led the U.S. to conduct fresh strikes against Iran the following day. Attacks between the two powers continued, with Iran targeting U.S. military bases in Kuwait and Bahrain and the U.S. targeting military facilities in Iran.

Iran’s Revolutionary Guards called the renewed U.S. strikes a ceasefire violation and announced that “all diplomatic processes” would be halted, as reported by Iran’s Press TV.

By late July, the two powers appeared to be at a stalemate once again, with the MoU in tatters and limited movement permitted through the Strait of Hormuz.

What Happened to Energy Trade Through the Strait of Hormuz?

The Strait of Hormuz is one of the world’s most critical maritime chokepoints, with roughly a quarter of global seaborne oil trade, one-fifth of global liquefied natural gas (LNG) trade, and significant volumes of fertilizers traversing the corridor when fully operational.

When Iran announced it planned to close the Strait of Hormuz in February, energy experts speculated that this would significantly reduce oil and gas flows, thereby creating shortages and sharply driving up prices. Due to the ongoing conflict, energy trade through the waterway has been extremely limited over the last half a year, a disruption so severe that the International Energy Agency (IEA) called it the “largest supply disruption in the history of the global oil market.”

In February, around 20 million barrels per day of crude and oil products were transported through the strait, with daily vessel transits averaging roughly 129 to 141 ships. This plummeted in March, after the start of the conflict, with tracking averages dropping to single-digit vessel counts on many days and direct crude shipments falling to an average of roughly 2.2 million bpd.

Between April and June, energy trade through the strait remained severely suppressed due to security risks, forcing regional exporters to rely heavily on bypass pipelines. In July, combined crude oil shipments from major Gulf producers totaled approximately 200 million barrels for the entire month, marking a 50% decrease on pre-war levels, before rising to an estimated average of 9 million bpd in mid-to-late August. This was supplemented by the roughly 5 to 7 million bpd diverted through regional overland pipelines, although monthly volumes remained uneven.

From July 15 to August 23, an average of around five vessels a day moved through the strait, marking a nearly 95% decline from pre-war traffic levels. The international response, given the scale of the disruption, has nevertheless demonstrated the resilience of the global energy market.

How Has the Energy System Adapted?

Despite the ongoing global energy disruptions and higher fuel prices in recent months, the energy market has remained surprisingly resilient. This has been driven by a combination of emergency rerouting, shifting partnerships, and structural diversification.

In The Great Energy Realignment: AI, Hormuz and Energy Security, Energy Network Media Group’s Chief Energy Analyst Robert Rapier explored the direction global energy may be taking in response to geopolitical challenges, energy diversification through green and nuclear transitions, and the potential impact of rising power demand driven by artificial intelligence.

Rapier states that he is surprised that the strait’s closure has not driven oil prices closer to $150 a barrel, given the severity of the trade restrictions, with the Brent benchmark instead remaining around the $100 mark over the last six months. He cites the resilience of the global energy system as the reason for the limited price inflation.

Rapier emphasizes that the IEA coordinated a 400-million-barrel emergency stock release, the largest in its history; IEA countries released emergency stocks; Saudi Arabia and the United Arab Emirates (UAE) pushed more oil through alternate routes; producers in the Americas increased their contribution; refiners adapted operations; and high prices suppressed demand.

These developments also illustrate how geopolitical disruption can affect AI-driven electricity demand and the wider energy system, as governments and companies balance energy security, infrastructure limitations and rising power requirements.

Rapier explains, “This is not an energy transition in the conventional sense of one fuel replacing another. It is a realignment in how countries think about energy.”

Renewed Fighting and a Possible Return to the MoU

After over a month of relative calm and no progress in negotiations, fears of renewed escalation grew across the Middle East in late August after the U.S. fired missiles and drones at Iranian rocket launchers on an island in the Strait of Hormuz, and Iran responded with attacks at U.S. bases in Jordan and the UAE.

The U.S. military said it had struck air defenses, radar systems, maritime assets, mine-laying capabilities, and communications sites.

In response to the renewed attacks on August 31, President Trump said that the U.S. hit Iran “very hard,” while Iran only responded with a “love tap.” Trump stated, “It was a very heavy attack last night, and we’re prepared to do another one any time we want.”

This led to fears that the new strikes signaled the resumption of a full-scale war.

Washington reported that despite Iranian attacks, it was continuing to guide tankers through the strait. U.S. Energy Secretary Chris Wright claimed that more than 17 million barrels of oil traversed the trade route on August 31, although tanker-tracking analysts have disputed the figure. Trump also reiterated that the strait was open to shipping.

Meanwhile, Iran blacklisted 11 more ships, bringing the total number to 56, according to government data. These vessels could be subject to fines, confiscation, or detention if they attempt to transit the Strait of Hormuz without Tehran’s permission.

Officials from Pakistan, Qatar, and Oman had arrived in Tehran in late August to renew diplomatic talks ahead of the August 31 exchange of attacks between the U.S. and Iran. Then, following the recent turbulence, Tehran suggested it may be willing to recommit to the terms of the MoU, provided Washington reciprocates.

During the Shanghai Cooperation Organization (SCO) summit in Bishkek, Kyrgyzstan, on September 1, President Pezeshkian stated his openness to returning to the interim agreement reached with the United States in June, just one day after the renewed attacks.

“I am stating clearly ‌that if the U.S. returns to its commitments under the memorandum of understanding, the Islamic Republic of Iran will immediately reciprocate,” Pezeshkian said, according to the Iranian state news agency (IRNA).

This echoed the sentiment of Foreign Minister Abbas Araghchi in a speech delivered a day prior, in which he said the U.S. must “return to its commitments and adhere to the memorandum’s terms; only then this situation will be resolved,” according to state media.

Pakistan’s Foreign Minister Ishaq Dar voiced his support for the move, stating that the “sincere implementation” of the MoU signed in June is still the “only way forward” to bring an end to the U.S.-Israel war on Iran.

Where Does the U.S. Stand?

Ahead of his visit to Tehran in late August, Pakistani army chief Field Marshal Asim Munir was reported to have spoken with Trump. A Pakistani source told Reuters that Washington wanted Islamabad to use its influence to bring Iran back toward negotiations.

Iranian officials later said that Munir’s visit had contributed to significant diplomatic progress, although Washington has publicly maintained that it is not currently holding negotiations with Tehran.

However, in response to Iran’s President Pezeshkian’s petition to recommit to the June MoU, President Trump told Fox News on September 1 that the United States had given Iran “a lot of chances” and said he had little faith in any agreement with Tehran.

“I think an agreement with them isn’t worth the paper it’s written on. We gave them a lot of chances,” Fox News quoted Trump as saying.

Taken together, those signals suggest that Washington has not completely closed the door to diplomacy, but neither has it embraced a return to the June MoU on Iran’s terms. The distinction is important. Tehran is publicly framing renewed implementation as a reciprocal process in which Washington must return to its commitments, while the Trump administration continues to emphasize military pressure and skepticism toward Iranian commitments. That leaves a potential negotiating channel open, but no evidence yet that the two sides agree on how to reenter it.

There are also differences in tone within Iran. Pezeshkian and Foreign Minister Abbas Araghchi have emphasized reciprocal implementation of the MoU, while Parliament Speaker Mohammad-Bagher Ghalibaf and the Revolutionary Guards have paired diplomacy with continued pressure over Hormuz. Whether those positions represent meaningful internal disagreement or different elements of the same negotiating strategy remains unclear, but Pezeshkian’s willingness to return to the agreement does not by itself guarantee that the broader Iranian leadership will accept the compromises required.

Where Does the U.S. Stand in Achieving Its Goals?

Over the last half a year, U.S. officials have said military operations have seriously degraded Iran’s conventional military capabilities, while the conflict and blockade have further weakened the Iranian economy. However, President Trump has not yet accomplished all of the aims set out at the launch of “Operation Epic Fury” in February, including permanently preventing Iran from obtaining nuclear weapons.

In February, the U.S. Secretary of War Pete Hegseth stated, “The mission of Operation Epic Fury is laser-focused: Destroy Iranian offensive missiles, destroy Iranian missile production, destroy their navy and other security infrastructure—and they will never have nuclear weapons.”

A recommitment from both sides to the June MoU could offer a diplomatic roadmap toward one of those principal objectives by establishing commitments related to Iran’s nuclear capabilities while creating a framework for broader negotiations.

Shifting the Focus to Energy

On September 3, when asked about a prospective timeline for the end of the U.S.-Israeli war on Iran, U.S. Vice President JD Vance declined to say, instead denying the continuance of an active war.

“I wouldn’t call it a war. Right now, there is no active shooting,” Vance said, before clarifying, “I recognize there have been places where this has flared up.”

Vance quickly turned the focus to energy, with emphasis on the situation in the Strait of Hormuz. “What we’re doing right now is protecting commercial shipping in order to ensure that we don’t have a worldwide energy crisis,” Vance said.

The Vice President also praised the new agreement that gives the United States majority control over access to 65 billion barrels of Venezuelan proven oil reserves, to help address global fuel disruption and bring down consumer costs. Vance added, “The only reason we don’t have an energy crisis is because of the leadership of the president but also because of the fine work of our military.”

What Would a Return to the MoU Change?

A durable return to the MoU could have consequences well beyond the immediate military situation. More predictable passage through Hormuz would allow tankers and LNG carriers to return toward normal routing, reduce dependence on expensive workarounds such as ship-to-ship transfers, and potentially lower freight and war-risk insurance costs. It could also remove some of the geopolitical premium embedded in oil and LNG prices, although the magnitude would depend on how quickly commercial traffic normalized and whether the agreement appeared durable.

For the United States, the benefit would not be limited to imported energy. Oil and refined products trade in global markets, so disruptions in the Persian Gulf can raise prices for U.S. consumers even when domestic production is strong. Greater stability in Hormuz would also reduce pressure on emergency reserves and alternative supply routes that have helped absorb the disruption during the past six months.

What This Means for the Global Energy System

To date, there is little information to suggest whether the U.S. and Iran will recommit to the June MoU or pursue another peace agreement. Iran has given no indication that it will lift its restrictions until Washington meets its stated conditions under the MoU. It also suggests that despite the U.S. military might, Iran still retains significant disruptive leverage over trade through the waterway.

On September 1, Iran’s Parliament Speaker and chief negotiator, Mohammad-Bagher Ghalibaf, emphasized the importance of ensuring the implementation of the conditions set out in the June memorandum. However, Ghalibaf threatened that until Washington implemented its obligations under the agreement, the Strait of Hormuz would remain closed, while emphasizing the progress made under the MoU, with over 80 million barrels of oil reportedly transiting the strait since June.

Ghalibaf also warned that if Washington escalated its military force, Iran would respond with further attacks on global energy. “If the enemy intends to prevent Iran from exporting oil from the Persian Gulf, it should know that no one else will be able to export oil from this region either,” he said.

The uncertainties around Strait of Hormuz trade over the last six months have led various regions of the world to seek alternative energy supplies and governments to reassess their energy security. This has prompted several countries to double down on deploying renewable energy and nuclear power to support energy diversification and boost self-sufficiency. Meanwhile, some countries have increased domestic fossil fuel output or sought to diversify their oil and gas suppliers to reduce reliance on the Strait of Hormuz and mitigate the risk of future geopolitical challenges.

This response reflects a broader energy-system realignment. As ENMG has reported, rising demand from artificial intelligence is also strengthening the near-term role of natural gas in global power markets, even as countries pursue renewable generation, nuclear power and greater domestic energy security.

In the Middle East, Saudi Arabia and the UAE have sought to circumvent the strait through various means. Together, the two countries have pipelines that can bypass the waterway, with an estimated capacity of 3.5 to 5.5 million barrels per day. However, this is still far below the strait’s average capacity of 20 million bpd.

There have also been reports that Qatar and the UAE transferred LNG cargoes between ships outside the Strait of Hormuz in August for delivery to India and Japan, according to the ship-tracking firms Vortexa and Kpler.

In August, the QatarEnergy-controlled Al Rekayyat tanker conducted the ship-to-ship transfer with another Qatari LNG tanker, Tambek. The original cargo was loaded at Qatar’s LNG production hub Ras Laffan before being transferred to Tambek for delivery to India’s Dahej terminal on August 31, according to Kpler data.

While ship-to-ship transfers take place in specific contexts, such as lightening oversized vessels or evading sanctions, they are uncommon in routine energy trade due to the broad range of security concerns associated with the practice, including environmental risks, complex weather constraints, and the strict technical requirements of vessels. In addition, managing specialized crews, insurance liabilities, and multi-party coordination, including adherence to strict guidelines from organizations like the International Chamber of Shipping, makes routine offshore transfers much more expensive than docking at a dedicated fixed terminal.

Fixed ports, pipelines, and floating storage and regasification units provide a much safer, faster, and higher-volume way to handle, store, and distribute energy commodities, which demonstrates the importance of physical infrastructure and shows that ship-to-ship transfer is not a sustainable long-term solution to the ongoing trade restrictions in the Strait of Hormuz.

These logistical constraints parallel the wider infrastructure challenges examined in ENMG’s coverage of U.S. grid modernization: energy security depends not merely on possessing resources, but on having the physical infrastructure required to move and deliver them.

The disruption is also changing how Asian energy importers approach supply security. India and Japan remain important buyers of Gulf LNG, but the risks surrounding the Strait of Hormuz are forcing them to balance the value of established Gulf supplies against increasingly complex logistics.

Three Qatar and UAE LNG cargoes were recently transferred between vessels outside the strait for delivery to India and Japan, an unusual arrangement for LNG that illustrates the lengths to which suppliers and buyers are willing to go to keep cargoes moving. India is also diversifying its LNG procurement toward suppliers including the United States, Oman, Nigeria, and Angola as uncertainty over Qatari deliveries persists.

Between March and June, Japan increased U.S. oil imports by more than 400%, while Middle Eastern supplies to Japan fell 54%. At the same time, India has been increasing diversification toward sources such as Russia, the U.S., Venezuela, and other suppliers.

Rather than eliminating Gulf energy from Asian supply chains, the disruption is encouraging a more flexible model in which buyers combine existing contracts, alternative suppliers, and more complex transportation arrangements to reduce their exposure to a single chokepoint.

The global energy system has been surprisingly effective at weathering the storm created by the war in Iran and the closure of the Strait of Hormuz. However, greater diversification of energy sources and suppliers, and the use of riskier techniques, such as ship-to-ship transfers and alternative nearby sea routes, can only go so far.

In his article, Rapier stresses the importance of geography in the global energy system. Many countries are seeking to develop domestic and regional energy supplies and mitigate geopolitical threats by diversifying fuel suppliers. Nonetheless, energy trade still relies heavily on physical infrastructure, from pipelines to tankers and transmission systems, which can be disrupted by geography, politics, weather, and war.

It is worth bearing in mind that the Strait of Hormuz has been geographically significant for oil and gas trade since at least the end of the Second World War, with energy trade growing year on year over the past 80 years. Irrespective of the progress made in diversifying and strengthening the global energy system, permanently shifting reliance away from the key trade corridor will be a mammoth task.

What to Watch Next

The effort to reduce reliance on Hormuz will continue regardless of whether diplomacy succeeds. In late August, U.S. Treasury Secretary Scott Bessent told reporters, “What we are going to see over the next two years—the strait is going to become irrelevant.” He explained that between 50% and 70% of the energy products typically transported through the Strait of Hormuz would instead be transported underground via pipelines.

The UAE expects its $3 billion pipeline expansion to its port of Fujairah to launch operations in 2027. Other countries across the region have announced significant investments in new pipeline infrastructure. However, the IEA has warned that other major projects, including a larger Saudi pipeline expansion, will likely take several more years to complete.

Even after those projects are completed, large volumes of Gulf energy would still depend on Hormuz. IEA senior oil market analyst Rebecca Schulz has estimated that more than 10 million barrels per day could still need to pass through the strait for Gulf exports to return to pre-war levels. Bypass routes also remain vulnerable to military attack and other disruptions, limiting their ability to substitute fully for a durable political settlement.

The more immediate question is whether Pezeshkian’s September 1 statement develops into actual diplomacy. Energy executives, investors and policymakers should watch whether Washington responds to Iran’s offer, whether Pakistan, Qatar or Oman can bring the two sides back into negotiations, and whether Iran begins easing restrictions on commercial navigation before a formal agreement is reached. Changes in tanker traffic, freight and insurance costs, Iranian oil exports and the use of bypass pipelines would provide tangible evidence that conditions are improving even before a broader political settlement is announced.

Pezeshkian has reopened a diplomatic door, but Washington has not yet indicated that it intends to walk through it. The next meaningful signals will come not only from official statements but from what happens in the strait itself: whether restrictions ease, tanker traffic increases, intermediaries produce renewed negotiations, and both sides begin carrying out any of the obligations contained in the June MoU. Until then, Hormuz remains both a military chokepoint and a source of economic leverage—and another test of how far the global energy realignment can proceed without a durable political settlement.

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