Strait of Hormuz traffic returns to normal by December 31?
Traffic through the Strait of Hormuz has improved from crisis lows, but it is still far below the level needed for this market to resolve Yes. With only a little over three months left in the year and recent averages still in the mid-teens, I think a return to a 7-day moving average of 60 or more is unlikely, though not impossible if conditions normalize quickly.
Analysis
The central issue is the gap between the current shipping environment and the threshold needed for a Yes. The market requires IMF Portwatch to publish a 7-day moving average of at least 60 transit calls on any date through December 31, 2026, while recent reported activity is still around 16 to 17 on a 10-day basis and has included daily counts as low as two or three ships. That means the strait is operating at a level far below the roughly 125 large commercial vessels per day that represented prewar normality, so the market would need a very large and sustained rebound in traffic in a relatively short time window.
There is some evidence that conditions have improved in a narrow operational sense. Military reporting indicates mines have been cleared from primary lanes and oil and LNG flows have recovered to a six-month high, which suggests the strait is functioning better than at the most stressed point in the disruption. However, the resolution standard is not simply that the route remains open or that energy volumes improve; it is specifically whether reported transit calls return to at least 60 on a 7-day moving average. On that metric, the recent ship-count data still point to a severely depressed traffic pattern rather than a genuine normalization.
The key question is whether the remaining time is enough for a step-change in behavior. For Yes to happen, shipping operators would need to restore a very large share of normal sailings, and that typically requires a durable reduction in security risk, insurance costs, rerouting incentives, and operational delays. Even if the geopolitical situation continues to improve, vessel schedules usually normalize more gradually than headline sentiment does, and the market would need the average to rise nearly fourfold from current levels. That makes the current market price around 18% for Yes look directionally reasonable, and if anything slightly generous to the upside unless there is a decisive and sustained de-escalation soon.
Arguments
For
- Arguments for Yes: Security conditions appear better than during the crisis peak, which could support a faster return of commercial traffic.
- Arguments for Yes: If shipping firms and insurers regain confidence quickly, the 7-day average could jump materially from the current depressed base.
Against
- Arguments against Yes: Recent traffic remains in the teens, which is far below the 60-call threshold and indicates persistent disruption.
- Arguments against Yes: The market needs a very large and sustained recovery before year-end, and shipping normalization usually takes time.
Key drivers
- Recent ship counts remain far below the 60-call threshold needed for resolution.
- The remaining time before year-end is short relative to the size of the traffic recovery required.
- Improved security conditions could accelerate restarts if insurers and carriers regain confidence.
- Energy flow recovery does not automatically imply full ship-traffic normalization.
Risk factors
- A rapid geopolitical de-escalation could trigger a sharper-than-expected rebound in transits.
- Portwatch data could rise quickly if carriers resume postponed voyages in a concentrated window.
- Temporary reporting volatility could produce a brief 7-day average above 60 sooner than expected.
- Operational repairs or reopened routing incentives could restore traffic faster than historical patterns suggest.
Scenarios
Best case
Tensions continue to ease, carriers rapidly restore regular Gulf routing, and the 7-day average of Strait of Hormuz transits climbs above 60 before the end of the year.
Most likely
The strait remains partially recovered but still abnormal, with traffic improving from current lows yet not enough to reach a 60-call 7-day moving average before year-end.
Worst case
Traffic stays suppressed or remains too erratic to approach the threshold, leaving the average well below 60 through December 31 and resolving No.
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