Strait of Hormuz traffic returns to normal by December 31?

The key point is that this contract does not require a complete return to pre-crisis conditions; it only needs IMF PortWatch to publish a seven-day moving average of at least 60 transit calls on any date before year-end. Even with that lower bar, the recent picture is still weak. Reported transits have been running in single digits or low teens on many days, and recent moving averages appear to be clustered far below the 60 threshold. That means the market needs not just improvement, but a several-fold increase in activity sustained long enough to lift the seven-day average across the cutoff.

Historically, the Strait of Hormuz is capable of very high traffic levels, with pre-disruption references around 100-plus ships per day. That matters because it shows 60 is not an implausible level in a normal environment. But the historical baseline also highlights how far the current situation has deteriorated. If traffic is still being described as patchy, wartime-like, or dependent on episodic transits rather than a broad restoration of commercial flows, then a 60 average by December 31 requires a meaningful and durable normalization, not just a brief rebound in a few categories of shipping.

The most important driver is geopolitical risk. Shipping patterns in the strait are being shaped by security concerns, retaliatory actions, and broader diplomatic standoffs, which are all variables that can change quickly but are hard to predict. A sudden ceasefire, de-escalation, or policy shift could cause traffic to recover faster than expected, especially if carriers who have been waiting offshore or diverting cargoes resume normal routing. However, absent a clear catalyst, the current trajectory still points to traffic remaining depressed well into the end of the year.

Market pricing around the mid-teens implies some expectation of a rebound, but not a strong one, and that seems directionally sensible. The biggest reason I would keep the probability low is that the contract needs a sustained seven-day average, not a one-day spike, so the market would need evidence of broad and stable restoration rather than temporary volatility. The chance of a quick normalization exists, but based on the current traffic levels and the security environment, I think the more likely outcome is that the threshold is never reached in 2026.