Strait of Hormuz dispute deepens as US and Iran clash over shipping routes

The memorandum of understanding (MoU) signed by the United States and Iran on June 17, which promised to extend the ceasefire and initiate talks on Iran's nuclear programme and Western sanctions, is unravelling. US President Donald Trump has declared that the “ceasefire is over,” while Tehran claims that parts of the MoU have been rendered “ineffective” by American actions. Both sides have accused each other of violating the agreement.

The US has carried out air strikes on hundreds of targets across Iran, and Tehran has retaliated by attacking US bases in several Persian Gulf countries as well as Jordan. Central to the renewed violence is a dispute over Article 5 of the MoU, which requires Iran to “make arrangements” for the “safe passage of commercial vessels” through the Strait of Hormuz. Iran has designated a new shipping route along its coast, while the US Navy has cleared an alternative route along Oman's coast. Iran views this as a violation of the clause by the US.

Last week, three tankers using the US-backed route came under Iranian attacks. The US says the attacks violated the MoU and launched air strikes in Iran. In response, the Islamic Revolutionary Guard Corps (IRGC) announced the temporary closure of the strait.

In the MoU, the US made several concessions to Iran, including lifting its maritime blockade, issuing a sanctions waiver for Iranian crude and other petroleum products, and promising Iran access to some of its frozen funds. After last week's escalation, the US revoked the waiver and reimposed some sanctions on Iran. However, Tehran appears determined to retain its grip over the strait, one of the world's most vital commercial chokepoints, even at the risk of all-out war and reversal of the MoU's purported gains.

Both the US and Iran view the Strait of Hormuz as critical to shaping the future balance of power in the Persian Gulf. In 2025, about 20 million barrels of oil per day passed through the strait, along with more than 112 billion cubic metres of liquefied natural gas. It also handled one-third of global seaborne urea trade, one-third of seaborne ammonia trade, and 40% of seaborne sulphur exports — together accounting for roughly 30% of global fertiliser trade. The strait will remain a critical artery linking the Persian Gulf to the global economy, and control over the waterway would give any regional power enormous strategic and economic leverage.

Iran believes it has inflicted a strategic defeat on the US and Israel, as both sides failed to achieve their declared objectives. Analysts suggest that Iran's ability to threaten closure of the strait played a critical part in this “victory,” forcing the US to agree to a ceasefire and later an MoU that largely favoured Tehran. Iran does not want to give up this leverage. If the US Navy institutionalises an alternative crossing along Oman's coast, Iran fears it would lose that advantage.

With little trust between the two sides, Iran wants to establish credible deterrence by asserting control over the strait rather than relying on American promises in the MoU, including sanctions relief. Tehran calculates that if it can absorb short-term costs and institutionalise its control over the strait, it would fundamentally transform the country's regional position, and sanctions relief could follow. The US, for the same reason, wants to deny Iran that leverage. It does not want Tehran to emerge as the sole custodian of the strait.