[Today’s Iran war post fired more or less fished but I had to run out. Since my absence was during the day in the Middle East, there may be consequential updates. Please return or refresh this page at 9:00 AM EDT just in case]
After having scored a seeming great success in getting the US to agree to a Memorandum of Understanding (MOU), Iran now seems to be having difficulty managing the spanners thrown by the US and its allies in the 60 day negotiation period, particularly the Gulf States. Yesterday, we highlighted a problem Iran will face that it seems not to have anticipated, that it will have to remain on a war footing on an ongoing basis if it is to maintain control over the Strait of Hormuz. Iran had unwisely assumed that it could get Oman to join in joint management of the Strait of Hormuz.1 We had noticed and sometimes commented on the fact that Oman was not responding to Iran entreaties.1
And there were obvious reasons why Oman was not likely to join Iran in its Persian Gulf Authority scheme. From reader KD in comments:
In a sense, if Oman agreed to go along with Iran on the Hormuz scheme, it would in effect turn them into a de facto Iranian proxy, and they would be tying their sovereignty to the Persian mast. This would be a very risky bet at this time, even putting aside all the objections that might be made for preservation of Oman’s independence. It would certainly pin a target on their back, and they would be a lot easier to take down than Iran given their size, topology, population and location.
Iran is now facing major challenges. One is that Oman, in conjunction with the UN International Maritime Organization, has opened up a corridor for the purpose of evacuating ships from the Gulf. However, it is not hard to imagine that having regularized one-way traffic on the Oman side, that it would not soon become two-way traffic, vitiating Iran control of the Strait of Hormuz. And we have pointed out that with the southern side of the Strait being Oman territorial waters, if Iran interferes with ship transits there, its presumed legal argument2 would look an awful lot like what Israel has been hawking in its invasion of Lebanon, that it can run roughshod over Omani sovereignity out of a not-credible claim of a security risk.
The second is that Israel is not just violating the ceasefire in Lebanon, but escalating via bombing in southern Lebanon. Yet so for Iran has done nothing about this transgression even though it has claimed that supporting Hezbollah and getting Israel to leave Lebanon were a top priority.
We’ll discuss the attacks on ships in the Omani corridor, which has reduced but not stopped transits. Note that so far no one has accused Iran, although the fact that the strikes came fast on heels of the Persian Gulf Authority warning against unauthorized transits, as on one outside its channel on the north side of the Strait of Hormuz, looks awfully guilty. Not surprisingly, the US has blamed Iran.
The attacks could have made by allies, say Iraqi militias, to give Iran a veneer of deniability. One would think if the strikes were instead an Israeli false flag, Iran would have promptly denied responsibility (mind you, that could still happen but it should have already happened if that were the case).
The Hindustan Times segment below gives details of the attack that did hit a vessel, which came from an armed skiff:
Note that while the UN operation has officially been paused…
…transits continue, but at a reduced rate:
Here’s my analysis of the Strait of Hormuz situation for the last 24 hours.
As I noted yesterday, I was seeing a lot of vessels using the Oman route to exit. This was following the announcement by Oman and IMO. The IRGC retailiated today on a vessel, but even after the attack, I… pic.twitter.com/1xBoCcch5j
On the inbound front, the flow is still heavily restricted. Whatever outflow we are seeing today is unsustainable as there are not enough non-Iranian tankers going in. In particular, we need empty VLCCs going in to load up crude. This is just a trickle so far.
In my view, the traffic in the Oman lane will lead to more escalation by IRGC. Without throttling flows entirely in the Southern lane, IRGC will lose control of its leverage over the Strait. If they act, then it’s a question of what the US does after.
But Bloomberg continues to show it is in the business of reassuring investors. From its landing page:
Now it may prove that (as we have suggested before) that it does not take much in the way of kinetic action to scare most shipowners. By contrast, owners and masters of ships stuck in the Gulf have a different risk profile and thus more would be prepared to hazard a departure as opposed to a round trip. So the level of presumed Iran action so far may be sufficient to assure dominance. But it also means the war will not end. And the US may decide to counter-choke Iran.
It is too easy to second guess Iran at this considerable remove when so far, it has performed far better than could have been anticipated. However, Iran has a long history of spectacular military successes over much bigger powers, only to be short changed when the losing state cheated on settlements, such as violating what we would now call non-aggression agreements.3
Nevertheless, given the flagrant Israel violations of the first clause of the MOU, Iran would seem to have easy grounds for taking action, ranging from attacking Israeli operations in Lebanon, striking sites in Israel with Iran found to be providing critical support to the Lebanon occupation, or to saying the Strait of Hormuz was closed until the US Did Something (which it could leave as a mere statement or back with a level of physical action). That is much cleaner grounds in terms of justifying its action to its key allies, Russia and China, and the global community.
By contrast, closing the Strait of Hormuz or interfering with Omani coast traffic, based on the bogus assertion of Persian Gulf Authority primacy (as in might makes right) is a pure power play that greatly undercuts Iran’s standing. It had clawed its way to the high ground despite the fierce opposition to its initial closure of the Strait of Hormuz (see the UN resolution condemning Iran with a record number of co-sponsors as evidence) even in the face of an illegal war, due to the US/Israel war crime like the attack on the Minab school, strikes on bridges and civilian power plants, and ultimately, Iran checking a deeply resented superpower. If Iran is indeed behind the attacks on vessels in Oman waters, which are being used for humanitarian as well as commercial purposes (evacuating stranded crews and getting needed cargoes out), it looks dog-in-the-mangerish, that Iran is putting power projection over decency as well as putting the global economy at risk.
Iran seems to be Japanese in its decision-making, as in preferring or needing to achieve consensus.4 The establishment of the Oman corridor may have deepened the split between the hard-liners and the political faction, with the latter so far seeming to have more sway in the negotiators.
It may be that Iran is stuck on the horns of a bigger dilemma. It very badly wants to get its oil sold and get the proceeds. The MOU allowed that to happen by giving Iran a 60 day license to sell oil and by ending the blockade. Professor Marandi acknowledged in one of his recent talks that Iran had been suffering under the blockade and intensified efforts to choke Iran’s economy. See this DW story from May, Iran medicine shortages worsened by war, for confirmation:
Now, the war launched by the US and Israel appears to have deepened the strain by disrupting regional supply routes, damaging parts of Iran’s health infrastructure and adding fresh pressure to an already fragile pharmaceutical market.
The results are affecting everyday life for many Iranians: from patients searching multiple pharmacies for medicine to doctors watching people abandon prescriptions they can no longer afford…
Iranian officials have tried to project calm, arguing that strategic reserves and domestic production have prevented a full-scale collapse. But the picture described by patients, doctors and industry figures is more troubling.
Hadi Ahmadi, a spokesperson for the Iranian Pharmacists Association, has warned that the war could create new shortages in materials needed for pharmaceutical production, including aluminum and petrochemical inputs.
Even where medicine stock still exists, future manufacturing may become harder if industrial feedstocks and packaging materials grow scarce.
So Iran has strong incentives not to abort the MOU, unless or until it can get enough badly needed supplies and funds so as to allow it to again go into survival mode if the “deal” goes pear shaped. But allowing much more than the short-term relief of letting the tankers trapped in the Gulf out undermines Iran’s position. Allowing the world to rebuild its oil inventories would mean Iran would have to strangle Strait of Hormuz traffic yet again for long enough to reduce caches to critical levels to assert dominance,
In addition, if these attacks were indeed Iran’s doing, they looked panicked, as if Iran was caught on the back foot and felt the need to take action immediately. One way Iran could thread this needle and somewhat maintain appearances is to let ships leave the Strait of Hormuz on the Omani side in support of the UN initiative, but bar inbound traffic based on the argument that the war was not over and it was acting responsibly to make sure that ships did not get trapped in the Gulf again if fighting resumed. This would mean only bottled-up oil inventories would get to the market, thus merely delaying the onset of the oil cliff as opposed to starting to erode it.
Iran appears to be trying to argue that the text of the MOU allows it to exercise control over the Strait of Hormuz, at least in the 60 day negotiation period. I don’t see how one can reach that conclusion based on the relevant text:
4 — Immediately upon the signing of this MOU, the United States of America will begin the removal of its naval blockade and any disturbances or impediments against the Islamic Republic of Iran, and will fully end the naval blockade within 30 days. During this period, the traffic of vessels will be in proportion to the numbers of pre-war traffic being restored by the Islamic Republic of Iran. The United States of America further undertakes to remove its forces from the proximity of the Islamic Republic of Iran within 30 days after the final deal.
5 — Upon the signing of this MOU, the Islamic Republic of Iran will make arrangements using its best efforts for the safe passage of commercial vessels with no charge, for 60 days only, from the Persian Gulf to the Sea of Oman and vice versa. The traffic of commercial vessels will immediately start, and considering the need for removing the technical and military obstacles, and demining by the Islamic Republic of Iran will be instated within 30 days. The Islamic Republic of Iran will conduct dialog with the Sultanate of Oman to define the future administration and maritime services in the Strait of Hormuz in discussion with other Persian Gulf littoral states in line with the applicable international law and the sovereign rights of coastal states of the Strait of Hormuz.
These sections confer no rights upon Iran with respect to the Strait of Hormuz. “…make arrangements using its best efforts for the safe passage of commercial vessels” does not exclude Oman permitting a transit channel on its side, consistent with UNCLOS.
Yesterday, we highlighted the unified US and Gulf state position at a meeting between Secretary of State Marco Rubio and GGC members that the Strait of Hormuz be unrestricted and fee-free. That cuts Iran off at the knees on its other hope of securing control of the Strait of Hormuz, that of securing the consent of the GCC states to joint Iran-Oman administration:
Even more serious is that this meeting looks to have been a wild success from the US vantage in scuppering any hope of near-term Iran-Gulf state reconciliation. The proof comes via the rash of angry statements from Iran. From Aljazeera’s live feed:
Iran’s Foreign Ministry has called the joint statement from the US and GCC countries “interventionist, irresponsible, and provocative,” and warned against “the continuation of hostile and interventionist behaviors in the region”.
Later headlines in the feed:
US military a burden for GCC countries, says Iran’s Foreign Ministry
US places no value on security of Gulf countries, says Iran’s Foreign Ministry
Iran urges GCC to support ‘nuclear-weapon-free zone’ in Middle East
The UN’s International Maritime Organization (IMO) has paused the planned evacuation of more than 11,000 sailors stranded in the Strait of Hormuz after a cargo ship passing through the waterway was attacked…
The British maritime security agency UKMTO reported on Thursday that a ship had been struck 7.5 nautical miles southeast of Oman’s port of Dahit by “an unknown projectile”. No casualties were reported.
Maritime risk management firm Vanguard said the ship, Singapore-flagged Ever Lovely, continued through strait despite the attack.
US officials said Iran had fired on the ship, according to US media reports…
In a post on X, the Persian Gulf Strait Authority (PGSA) said: “Any consequences arising from the use of unauthorised routes shall be the responsibility of the vessel’s owner, operator and master”.
However, Iran may have picked its presumed target very carefully. Again from BBC:
[IMO chief Arsenio] Dominguez said in a statement on Thursday that the vessel that was attacked “did not transit under IMO’s evacuation framework”.
On the Lebanon front, Israel has gone from shooting civilians in southern Lebanon to bombing:
The new Janta Ka segment mentions at 15:20 that Iran has not attempted to stop Israel’s increasing attacks on Lebanon. It then shows an Aljazeera clip where the reporter states that Hezbollah has held back from retaliation in the face of the new Israel bombing out of fear of more air strikes:
So far, Iran’s response looks like weak tea. Again from the Aljazeera live feed:
Iran threatens response ‘if US is unable to contain’ Israeli aircraft
Khatam al-Anbiya Central Headquarters, the unified command of Iran’s armed forces, has said in a statement that Tehran considers the “movements and presence of military aircraft in the skies of some neighbouring countries towards Iran as a dangerous act and a threat against the Islamic Republic of Iran”.
In the statement, quoted by Iran’s Fars news agency, the headquarters further noted that if the US “is unable to contain and control the Zionist [Israeli] regime, the Islamic Republic of Iran will not tolerate any threat against it and considers it its right to respond to these dangerous actions”.
Hundreds of Palestinians protested Thursday in Beersheba in Israel’s southern Negev region against Israeli policies of home demolitions and land confiscation targeting Bedouin communities in the area.
According to the Israeli daily Yedioth Ahronoth, protesters included residents of Bedouin communities affected by demolitions or facing displacement, as well as supporters from among Arab Israelis.
On other MOU matters, dueling narratives continue. Rubio again insisted that Iran was required to used frozen funds to buy US farm products. Iran again issued a fierce denial:
America falsely claims our unfrozen assets will buy their agriculture. Interesting. The only crop we’re harvesting is what you planted: decades of mistrust. It’s organic, abundant, and homegrown. But apparently the US only exports GMO soybeans, broken promises and trash talks.
— محمدباقر قالیباف | MB Ghalibaf (@mb_ghalibaf) June 25, 2026
And briefly on Cushing: most observers have put the operating minimum at 18 or 19 million barrels. This encapsulates the bull versus bear case:
Let’s see, there is around 18-19 million barrels remaining at Cushing. I’m not sure dry is exactly dry as we believe. In 2004, Cushing briefly dropped to 11-13 million barrels. Call me stupid, But that tells me there is still around 6 weeks of crude available to pump at current…
I would not place a lot of stock in a minimum reached only “briefly” back in 2004. These low levels will be sustained easily for weeks. I am no expert, but in the case of the salt caves of the SPR, the operating minimum has risen a lot due to age and less than ideal maintenance. I have no idea if that is in play with Cushing but it could be. In addition, I have tended to dismiss arguments based on “sludge” but accumulated debris does raise the minimum operating level. So again, the operating minimum might not be breached in the next day or two, but it six weeks away seems wildly optimistic.
The new post, Two Spikes Coming? by Nick Wade is a must read. I will merely hoist some key bits and hope you will read it in full. From its top:
Cushing, Oklahoma is the pricing point for West Texas Intermediate (WTI) crude and the physical hub through which US oil supply flows to refineries across the Midwest and Gulf Coast. As of 25 June, inventories have fallen to 19 million barrels, below the operational minimum (~20mb) that the industry considers the threshold for physical stress. The US Strategic Petroleum Reserve (SPR) has fallen to 331.2 million barrels, the lowest since 1983. According to the IEA, global inventories are at their lowest seasonal point in recorded history.
The market has priced almost none of this.
What happens with Cushing below operational minimum?
When inventory falls below the operational limits (~20mb) – which Cushing has now breached, at 19mb – the hub enters a stress zone rather than hitting a cliff edge. The operational minimum is not a precise failure point; it is the threshold below which there is no buffer left to absorb further stress. The immediate effects are mechanical.
Pipelines that draw from Cushing operate on pressure differentials, but inventories at this level do not cause pipelines to fail instantaneously. What deteriorates first is scheduling reliability, the ability to guarantee volume and timing. Refineries that depend on Cushing lose the flexibility to absorb disruptions or respond to demand spikes. They are forced to draw on their own tank inventory as a buffer, but those buffers are also depleted.
Blending flexibility deteriorates with it, because the crude that remains at tank bottoms is the lowest quality and pulling it through creates blending problems. Cushing’s core function is blending different grades from the Permian, Bakken, and Canadian streams to meet pipeline quality specifications and refinery feedstock requirements. When you’re scraping the bottom, blending optionality narrows significantly, so refineries either accept degraded feedstock or reduce runs.
The financial effect then follows. WTI physically settles at Cushing, and when physical delivery becomes constrained, physical tightness increasingly dominates futures pricing. You get extreme backwardation and basis blowouts as buyers scramble for physical barrels that can’t be reliably delivered. The WTI-Brent spread would likely widen – the US price and the global price decouple – and with US export capacity under pressure, nothing is left to hold Brent down.
Midwest refineries are the most exposed because they are dependent on pipelines from Cushing and have limited alternative supply access. Gulf Coast refineries theoretically have more flexibility as they can draw waterborne imports, but they are already running at record utilisation. US crude exports have run at record levels since March, with the Gulf Coast processing additional crude to produce the diesel, jet fuel, and gasoline that Middle Eastern and Asian refineries could no longer supply at normal volumes as Gulf feedstock flows through Hormuz collapsed. That additional throughput has been draining Cushing. The crude draw and the product export are the same event viewed from different ends of the supply chain.
The broader consequence is that Cushing operational stress would convert a global supply disruption into a US domestic supply disruption simultaneously.
We’ll stop here. Hopefully I will not see you again until Monday.
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1 As far as I can tell, Oman accepted an Iran visit on this matter only twice, once roughly a month ago where Oman said nothing afterwards and Iran made happy-speak statements which, carefully read, did not say Oman had agreed to anything but could give a casual reader the reverse impression. At the time, I thought those public comments would have annoyed Oman. Iran also came to Oman the day before it announced and implemented its maritime channel in connection with the UN International Maritime Organization. That looks to me to be a last-ditch effort to persuade Oman not to go ahead.
2 Sal Mercogliano gives a not-bad overview of the legal questions. He does point out that what amounts to applicable law is murky. However, he effectively takes the position that Iran must fall in line with the “transit passage” standard set forth in UNCLOS.
In a regional context the battle had little negative impact for Rome in the long term as the following retaliatory Pompeian–Parthian invasion of 40 BC in 40 BC was stopped and repulsed by Publius Ventidius Bassus, and it did not prevent Antony’s Atropatene campaign an invasion of Parthia by Mark Anthony in 36 BC (although this campaign ended in failure as well).
However, the spectacular Roman loss arguably ended the Roman Republic, as in precipitated regime change. From Britannica:
Nevertheless, Crassus’s death had an outsize impact on the balance of power in Rome. Without a balancing figure in their political alliance, Caesar and Pompey’s relationship devolved into civil war by 49 bce. It would mean the destruction of the Roman Republic and the emergence of the Roman Empire in 27 bce.
4 Contrary to widespread Western perceptions, nemawashi (根回し) is not nice. There is a lot of sharp-elbowed jockeying.
