Iran insists Hormuz stays shut until sanctions relief, end of blockade

For oil markets, the crucial point is that Iran has directly linked the strait's reopening to conditions such as sanctions relief, ending the US naval blockade, and releasing frozen funds. This means any return to normal supply requires a comprehensive political agreement, not just a truce. Crude's early decline suggests traders expect diplomatic progress rather than military conflict, but the substantial differences between the two sides keep a risk premium in place. The next 36 hours of messages via Qatar represent the near-term trigger: a positive reply could push prices down further, whereas a breakdown or an Israeli strike without US support would probably cause a sharp increase. Iran's warnings about striking US facilities in Europe introduce an additional danger beyond the Gulf region.

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Talks are ongoing, but Tehran has stated that sanctions relief is the cost for reopening the strait, and the US has not yet agreed to that.

Main points:

• A senior Iranian source told Reuters that Tehran and Washington are still far from an agreement.
• Tehran insists the strait will only open once oil sanctions are lifted, the naval blockade is terminated, and frozen assets are freed.
• Qatar reports that both parties are studying proposals, and replies are anticipated within 36 hours.
• Trump declared the US is ready to strike but may not have to, and that indirect talks on Iran's enriched uranium are ongoing.
• US military conducted restricted strikes on Iran's Qeshm island overnight, which were characterized as defensive.
• Crude declined in early Asian trading even though US crude inventories unexpectedly dropped.

According to a senior Iranian official who spoke to Reuters, Iran and the US are still far from an agreement to conclude their conflict. Tehran stated that the Strait of Hormuz would remain shut until its demands are fulfilled, whereas President Donald Trump indicated he is prepared for additional strikes but not in a rush to carry them out.

The official added that mediators are striving to reduce the differences, but Iran will not agree to what it considers unreasonable US demands. Iran's prerequisites for reopening Hormuz comprise lifting oil sanctions, ending the US naval blockade of its harbors, and releasing frozen Iranian assets. The official said nuclear negotiations could commence only after those terms are satisfied. Mohsen Rezaei, head of Iran's Supreme National Security Council, remarked that Washington's reply thus far has not been persuasive, and that the strait will open solely if the US meets all seven of Iran's stipulations.

Qatar is taking the lead in mediation. The Qatari foreign ministry stated that both parties are examining proposals, and a source with knowledge of the negotiations informed Reuters that responses from Washington and Tehran are due within 36 hours. A senior Iranian official subsequently said there is no set time limit for exchanging communications.

Trump adopted a varied stance in different interviews. In the Financial Times, he said the US seems to be obtaining all it desires and that, though prepared to act, there may be no necessity. He mentioned that back-channel discussions regarding Iran's enriched uranium stockpile are proceeding. During a Fox News interview, he expressed that he does not want heavy casualties but will take action if necessary.

Military operations have persisted. US forces executed restricted strikes on Iran's Qeshm island overnight, aiming at surface-to-air missiles that were employed against US assets. A US official termed the strikes defensive and stated they do not indicate a resumption of large-scale conflict. Iranian officials cautioned of an instant reply to any additional assault, without geographic limitations.

Additionally, Trump declared an agreement with Israel in which the US will cease $4 billion in yearly aid after the current year, while still supplying weapons to Israel.

According to Reuters, crude prices edged down in early Asian trading on Wednesday as investors waited for the midterm election outcomes and their influence on the negotiations. The decline occurred even though industry data revealed a surprise drop in US crude stockpiles.

Normal operations resume on Thursday.