Strait of Hormuz traffic returns to normal by December 31?

The most important near-term datapoint is that IMF PortWatch was reportedly updated through July 5 and the latest peak 7-day average was 35, only slightly above the prior revised peak of 31. That is still far below the 60-call trigger, so the market needs a large additional recovery rather than a modest continuation of the recent bounce.

The security backdrop worsened again over July 6 to 8. The IMO condemned fresh attacks on commercial ships in the Strait of Hormuz, said hundreds of ships and around 6,000 seafarers remain stranded, and urged operators to avoid transiting unless safety can be assured, while S&P Global reported that attacks, dark sailing, and an elevated threat environment continued to distort routing. That combination is much more consistent with a fragile, conflict-driven partial reopening than with a clean return to normal traffic.

There is still a plausible recovery path because ships are not completely absent from the strait, June traffic was materially higher than May in Lloyd’s List Intelligence data, and U.S. officials are still pressing Iran to publicly guarantee safe passage while negotiations continue. My inference is that the balance now depends less on whether the strait is technically open and more on whether a durable de-escalation emerges soon enough for carriers to resume routine routing and insurance behavior before year-end.

Against that, the current market price of 62.5% for Yes seems to assume a fairly strong recovery from here. Given the latest attacks and the still-low PortWatch peak, I think a 60-plus 7-day average by December 31 is more likely than not only if the ceasefire holds and confidence returns quickly; otherwise the waterway can stay stuck in the 30s or 40s for a long time.