Oman has joined the United Kingdom and France in a security pact designed to secure its territorial waters for sea traffic through the Strait of Hormuz, bringing Muscat more into the fray of an increasingly open confrontation over patrolling rights for one of the world's busiest oil lanes. The announcement was made in a joint statement released at Downing Street on July 3 by Prime Minister Keir Starmer and French President Emmanuel Macron, who stated that the strait is "a vital artery for the global economy" and that the resumption of safe passage by vessels of all flags "is of concern for all nations". Britain and France also emphasized that they were willing to deploy a larger Multinational Military Mission if there were a need for increased support for the freedom of navigation within the strait.

Timing is not an accident. Haitham bin Tarik, Oman's Sultan, met with Starmer in London on Thursday before the speech was made; according to Oman's state news agency, the two leaders spoke about ways to de-escalate the broader conflict in the Middle East and ensure the safe passage through the most sensitive waterway in the Gulf. The sultan's first visit to European capitals since the ceasefire between the United States and Iran went into effect last month also came after a visit to Paris, where French officials have been similarly keen to demonstrate they have a voice on security on the Hormuz.

Iran did not take its time to react. Deputy Foreign Minister Kazem Gharibabadi has sharply replied to the military exercises held by foreign powers in the strait on social media and said the responsibility for its security lies with the countries bordering the strait. He characterized the London-Paris-Muscat plan as provocative and said that he would hold to account those that he said were stoking the crisis over what he called their adventurism. It went far enough as to suggest it was a marker being set down ahead of serious talks on the long-term governance of the strait, rather than routine diplomatic sparring.

To appreciate the heat that is coming from the joint statement on “territorial waters”, it is necessary to take a quick look six weeks back. Washington and Tehran have signed a memorandum of understanding on June 17 that halted nearly four months of direct conflict and reopened the strait, which has been effectively closed since late February, when Iran's Revolutionary Guard laid mines, fired on commercial vessels and warned ships away. That memorandum provided Iran with sixty days to breathe, allowing commercial shipping to pass freely, while Iran and Oman were given the job of working out with the other Gulf states how the waterway would be operated when the sixty days expired. The sixty days period is now half over, hence the rush to the summits in London and Paris.

France has backed up its rhetoric with hardware. French mine-clearing vessels a pair of dedicated minehunters and two escort frigates and a maritime patrol aircraft have been dispatched to the area and are “ready to contribute to the restoration of full navigation” in the strait, Macron said on social media. Meanwhile, the aircraft carrier Charles de Gaulle, which was forward-deployed during the peak of the battle, is also on its way back to its base in Toulon, he confirmed. The adjustment, Macron said, was "a response to the improvement of the situation but also to constructive discussions with the Sultan" and he said that France's mine-clearing capabilities and their protective shield have not been removed and continue to be on standby to work with partners. That mix (capital ship down, minehunters up) is a very good indication of the whereof the danger lies. The war is over, but the war's ordnance, left in the water, has not been completely removed, and demining is unattractive labor which still requires an armed escort if it is to be performed safely.

The economic context provides an explanation for why any government with an interest in energy markets is taking a close look. Brent, which hovered at the high end of the mid-90s per barrel during the peak of the fighting, is down about 39 percent from its March peak and was selling around $71.7 to $71.9 a barrel on Monday, while U.S. benchmark crude WTI was trading near $68.4 to $68.6. In fact, oil prices took a hit on the day of the Oman deal, as OPEC+ agreed over the weekend to boost output targets by another 188,000 bpd from August, adding to similar increases in the previous two months. To the extent that traders are betting that supply will return before demand finally emerges, and that the physical Hormuz risk premium has largely been unwound even though the political risk remains, they are right.

For shipping information, it is that data that backs up that read. Saudi Arabia shipped approximately 34 million barrels of crude during the two weeks since the ceasefire, which is more than double the roughly 15 million it managed to export across the 10 weeks of effectiveness of fighting since March and mid-June, according to Kpler, a trade intelligence firm. The UAE has been exporting more than 3.9 million bpd, using a strait and a pipeline that goes around it. Saudi exports officials estimate that the kingdom is now exporting at about 90 percent of pre-war levels. But all that doesn't remove the wounds on the insurance side of the business. Typically only a small fraction of one percent of a vessel's insured value in peacetime, war-risk premiums for transiting Gulf tankers jumped as high as 4,000 times as risk assessments used by the maritime industry peaked during the crisis, only to retreat as the ceasefire is implemented. It was the difference between paying a few hundred thousand dollars a trip and several million dollars on a boat that cost about $100 million to $150 million. Those costs are simply transferred to charterers and thence to refiners and ultimately to the pump price of the fuel, which is why finance ministries in London and Paris are as interested in this dossier as their defence ministries.

The question that remains unsettled and indeed the one that is frustrating Iran over the UK-France statement is who will be able to charge for the right to use the strait after the expiry of the sixty-day free pass through. Iran and Oman have reportedly submitted a proposal to Washington for a jointly-managed service fee system, similar to that which supports navigational safety in the Malacca and Singapore straits. Omani authorities have officially said that any charges would be voluntary and based on real safety and conservation concerns, which Muscat has been secretly doing for years without any reimbursement. Iranian officials briefing same reporters have expressed the payments in much more mandatory terms. Washington has adamantly opposed a toll on an international waterway and Secretary of State Marco Rubio told reporters that under international law, no country can charge a fee for passage through such a waterway, while officials at the Treasury have threatened sanctions if Oman is found assisting Iran's efforts to establish a toll. Saudi Arabia has been the most vocal voice in the Gulf against any new charge, and its foreign minister has been publicly arguing that the strait should revert to the status quo ante instead of having a new arrangement foisted on it due to the war.

That's the foundation of the diplomacy of the past week. The analysts who monitor the region say Oman is in an unusually precarious position as it attempts to balance between an Iranian government that wants to use its wartime control of the strait as a leverage point for a permanent right to revenues and an American administration that sees any fee, no matter how it is written, as an ominous precedent for freedom of navigation in general. Muscat has the option to publically join London and Paris on the less contentious issue of maintaining its territorial waters physically protected, and could thereby show cooperation with the West without yet having to concede on the parallel, far more problematic, negotiations with Tehran for payment. That uncertainty may persist after the sixty-day period is over, and for now markets seem to be treating it as a minor irritant, rather than a danger.

The issues at stake extend beyond the Gulf. About one in five barrels of the world's seaborne oil and a similar percentage of liquefied natural gas normally flow through this 30-mile-wide channel to fuel refineries as far west as Yokohama and as far east as Rotterdam, with more than eighty percent of the crude passing through destined for Asian markets, primarily China, India, Japan and South Korea. One related but separate concern, highlighted by international economic institutions monitoring the consequences of the conflict, is that the insurance and reinsurance industry's reaction to the months-long correlation of losses in marine, energy and political-risk lines could permanently change the risk pricing on the entire Gulf region of the world, irrespective of how the diplomacy unfolds. That's the sort of transformation that transcends any one ceasefire and gradually makes it harder to do business in a region that accounts for 20% of the world's oil.

The UK France Oman deal for now is a test of practicality to see whether it becomes more than a press release. The names of the vessels, deployment dates or rules of engagement have not been released. What remains is a statement of intent, a downsized French navy that balances firepower with mine-cleaning, and a U.K. government more interested in demonstrating it has a place at the table than in sending troops it hasn't yet been called upon to provide. Meanwhile, Iran has said it will use the 60-day ban as leverage, not as a limit it has to abide by. How the Strait of Hormuz will hit that sweet spot between placating Western partners and keeping a neighbor across a channel less than thirty miles wide from taking the place of the trade route, will depend on how the rest of the year plays out.