Strait of Hormuz traffic returns to normal by December 31?
Traffic has improved from the trough but remains far below a 60-vessel 7-day average, so I think the market is overpricing a full return to normal by year-end. I put the Yes chance below the current price because it likely takes a major security de-escalation or diplomatic breakthrough to clear the threshold.
Analysis
The latest readings still show a heavily disrupted corridor rather than a normalized one. Daily and weekly transit counts have stayed well below historical norms, with recent snapshots suggesting only a small fraction of the pre-crisis flow that was closer to the 90s on a 7-day average. Because the market resolves on a 7-day moving average reaching 60 or more, the relevant question is not whether traffic remains nonzero, but whether it can recover by roughly an order of magnitude and stay there long enough to register in the moving average.
There is some reason to keep a meaningful chance of Yes on the board. The strait has not been fully shut, and recent reports show vessels still moving through, including occasional tankers and bulk carriers. That matters because once security perceptions improve, shipping schedules can restart faster than many people expect, and a sustained improvement in routing confidence could lift the 7-day average relatively quickly. The recent week-to-week bump in counts also suggests the system is not frozen permanently; it is merely operating under severe caution and disruption.
Even so, the balance of evidence still leans against a full recovery by December 31. The security backdrop remains unstable, shipowner caution is still high, and alternative routing or selective transits can keep traffic from returning to broad, normal use of the waterway. The current market price implies a better-than-even chance of reaching the threshold, but I think that is too optimistic given how far below normal traffic remains and how dependent the outcome is on a durable geopolitical or maritime safety improvement. My estimate is that Yes is possible, but more likely than not the 60 average is not reached in time.
Arguments
For
- Traffic is still flowing, which means the corridor can normalize quickly if the security environment improves.
- A sustained return of scheduled tanker and cargo movements could push the 7-day average above 60 without requiring a full return to pre-crisis peaks.
Against
- Current traffic is still far below the historical baseline, so reaching 60 requires a large and sustained recovery.
- Ongoing threats and uncertain diplomacy make it hard to believe the route will normalize enough by December 31.
Key drivers
- A durable reduction in attacks or threats would be the fastest path to a sustained rise in transits.
- The 7-day moving average requires sustained recovery, so short-lived spikes are not enough.
- Current traffic is far below historical baseline levels, making the needed rebound unusually large.
Risk factors
- Any new security incident could keep shipowners and insurers cautious through year-end.
- A partial rebound may still leave the average below 60 if traffic remains routed around the strait or concentrated in only some vessel classes.
Scenarios
Best case
A meaningful de-escalation or security arrangement restores shipowner confidence, traffic rebounds steadily over several weeks, and the 7-day average crosses 60 before year-end.
Most likely
Traffic improves somewhat from the current trough but remains volatile and below the threshold, with occasional busier periods that are not sustained long enough to trigger a Yes resolution.
Worst case
Tensions and sporadic incidents persist, traffic stays in a depressed range, and the 7-day average never comes close to 60.
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