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The US and Iran reach a deal to open the Strait of Hormuz following months of tension between the nations. On June 14, President Trump announced that the countries reached an agreement to end the war that closed the strait. Although Trump has not yet released the full terms of the agreement, the countries will meet to sign the deal. Some of the terms of the temporary agreement include:
Following the signing, the countries will have 60 days to reach a final agreement.
The Strait of Hormuz was originally operating at limited capacity due to escalating conflict between Iran and its neighboring adversaries. Recent US involvement further increased tensions and led to a greater closure of the strait. With the waterway being responsible for nearly 20% of the world’s oil and liquefied natural gas (LNG), this left a strain on shipping. The cost of oil imports rose significantly, and these higher costs were passed on across numerous supply chains. Domestic shipping also incurred higher costs, as trucks transported the cargo to the final destination. Carriers transporting cargo were delayed or stuck, further disrupting supply chains. After months of back-and-forth, the economies reached a deal to prevent further disruptions.
Given the Strait of Hormuz’s importance to global shipping, a deal can positively impact the industry. As shippers export more oil through the strait, gas and other commodity prices may decline. The cost of shipping goods that pass through the strait, such as fertilizers and oil, may also decrease. In turn, costs across supply chains, including those that pass through the strait, may also go down. Ships that use the waterway as a shortcut may not need to reroute, which can lead to delays. It is important to note that the countries will still have 60 days before finalizing a deal.
As the strait reopens, it can be more beneficial to import into and from the US. Despite the benefits, shippers should understand what to expect when starting. Failure to understand can lead to delays and monetary loss. An ideal way to begin is to speak with a 3PL (third-party logistics) provider like A1 Worldwide Logistics. 3PL’s are service providers that assist with various aspects of the supply chain. Some solutions they offer include freight forwarding, customs clearance, trucking, and more. They also provide consultation services to ensure a successful shipment. Contact us at info@a1wwl.com or 305-425-9456 to learn about our 3PL solutions for shipping your cargo anywhere in the world.
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