A month after the start of the ceasefire between US/Israel and Iran on April 8, there seems to have been limited progress on a permanent resolution.  

The Persian Gulf now finds itself in the peculiar situation of a “double blockade”. Iran is restricting navigation in the Strait of Hormuz, while the US has also imposed its own blockade on Iranian ports. 

Despite intermediation by Pakistan and the news of several exchanges of proposals between the parties to end the status quo, details of these proposals vary depending on which party talks about them. It is therefore difficult to gauge how likely an agreement might be and what it would entail. 

Practically speaking, it appears that both blockades are enforced loosely, with Iran selectively allowing some ships to transit through the Strait, while the US seems to have similarly allowed passage of some Iranian ships. This highlights that for now, both parties have a slight preference for avoiding renewed hostilities. 

However, given the persistent gap between each side’s demands, the current “no peace, no war” status quo is likely to drag on. 

Both the US and Iran seem to have a higher tolerance for this scenario than much of the international community. The US is less directly exposed to disruptions in oil shipping, while Iran has developed a high degree of resilience after decades of operating under heavy sanctions. 

Conversely, the conflict has already significantly affected many Asian and African countries. Energy saving measures have been implemented, including rationing in Sri Lanka, while the Philippines and Madagascar have declared a national energy emergency. Europe is also also starting to feel the effects. Thousands of flights have already been canceled by European airlines as jet fuel reserves are running low.

If Iran’s blockade of the Hormuz Strait continues, energy reserves will be depleted further, pushing prices higher and placing additional strain on the global economy. The result would a damaging combination of slower growth and renewed inflationary pressure. 

Having failed to gather a coalition for kinetic action to reopen the Strait, the US has signaled that an old passageway through Omani waters is now open for transit, likely in an attempt to influence negotiations with Iran.  

What lies ahead? 

The only certainty under the status quo is continued pressure on global oil supply. Combined with the gradual depletion of reserves, this will place increasing strain on economies around the world, contributing to slower growth, higher inflation and knock-on effects across industries closely tied to energy supply. This includes other commodities such as aluminum, urea and helium, which transit through the Gulf and are becoming  increasingly scarce. 

Geopolitically, more countries may attempt to engage with Iran directly, including some in Europe and Asia looking to strike one-off deals, while others will try to foster some form of resolution by pleading with the US or by supporting Pakistan and Oman in their intermediation efforts. How effective these efforts will be remains unclear.  

A tremendous challenge remains ahead. Off-ramps are possible and are likely the least contentious outcome for US and Iran, yet both parties thus far have proven stubborn in negotiations, thus, prolonging the ceasefire. 

Ultimately, it is important to emphasize that even considering a possible resolution, much of the damage done to global oil supply will not materialize until the months and years ahead. Even if energy prices do eventually go down, they are unlikely to revert to the pre-war level in the near- to medium-term.