Battle for the Strait: Oman Proposes Deal, Iran Responds with Strict Counter-Offer

Diplomatic efforts to reopen and secure the Strait of Hormuz—the narrow waterway responsible for nearly 20% of the world’s crude oil and liquefied natural gas (LNG) traffic—have hit a critical juncture.

Oman, acting as a key regional mediator, presented a Gulf-backed plan to restore commercial shipping across the strait. However, Tehran officially rejected the terms and responded with a strict counter-proposal of its own, warning that the vital maritime corridor will remain restricted unless its national security demands are met.

Here is a breakdown of what was proposed, why the talks stalled, and what it means for global energy markets.

The Two Proposals at a Glance

The impasse centers on who controls the shipping lanes and whether vessels should pay to pass through.

Feature	Oman’s Gulf-Backed Proposal	Iran’s Counter-Proposal
Control Split	50–50 Joint Oversight. Even split between Iranian and Omani territorial waters.	Dominant Iranian Control. Inbound route and part of the outbound route remain in Iranian waters.
Transit Fees	Voluntary Contributions. Modeled on the Strait of Malacca system to cover safety, environmental protection, and search-and-rescue operations.	Service Charges & Security Approval. Mandatory fees and pre-approved shipping routes.
Regional Inclusion	Joint regional management mechanism involving regional partners.	Rejects outside participation; insists only littoral states (Iran and Oman) govern the strait.

Key Sticking Points

1. The "Strait of Malacca" Voluntary Model vs. Mandatory Tolls

Oman’s initiative tried to mirror the funding structure used in Southeast Asia’s Strait of Malacca (governed by Singapore, Malaysia, and Indonesia). Under that system, commercial vessels can choose to pay voluntary contributions toward maintaining navigation aids and environmental protection.

Tehran rejected this voluntary structure, insisting that ships must pay mandatory fees for passage and adhere to Iranian security oversight.

The U.S. Position: Washington continues to oppose any mandatory transit fees or unilateral restrictions on the waterway, reiterating that international law guarantees freedom of navigation through international straits.

2. Physical Route Control

Under Oman's 50-50 framework, inbound ships would pass through Iranian waters, while outbound ships would exit through Omani waters.

Iranian Deputy Foreign Minister Kazem Gharibabadi stated that this arrangement fails to address Tehran’s security needs. Instead, Tehran wants all inbound traffic and a portion of outbound traffic to pass through Iranian-controlled lanes so Iranian forces can monitor all vessel movements.

Why This Matters

The Strait of Hormuz is the most vital oil chokepoint in the world. Prolonged disruption directly impacts global trade:

• Energy Delivery Delays: Major exporters like QatarEnergy have warned buyers of extended shipping delays for LNG shipments into autumn.

• Freight & Insurance Costs: War risk premiums and freight rates remain elevated as long as navigation remains uncertain.

• Fertilizers & Food Security: Roughly 30% of global maritime fertilizer trade passes through the strait, creating ripple effects across global agricultural supply chains.

While oil markets spiked and dipped as rumors of negotiations circulated, analysts agree that a final, lasting agreement will require consensus not just between Tehran and Muscat, but across the broader international community.

The legal framework governing key global waterways like the Strait of Hormuz is defined by the 1982 United Nations Convention on the Law of the Sea (UNCLOS).

To understand why diplomatic stalemates over transit rights, fees, and coastal control arise, it helps to examine how UNCLOS balances a coastal state’s national security with global rights to trade and navigation.

1. The Right of Transit Passage (UNCLOS Article 37–44)

In standard "territorial waters" (up to 12 nautical miles from a coastline), foreign vessels normally enjoy the right of Innocent Passage — meaning coastal states can set strict conditions or temporarily suspend passage if they deem a vessel's presence prejudicial to peace, good order, or security.

However, international straits that connect one part of the high seas or an Exclusive Economic Zone (EEZ) to another (such as the Strait of Hormuz, connecting the Persian Gulf to the Gulf of Oman) operate under a much stronger legal standard: Transit Passage.

[ Persian Gulf (EEZ/High Seas) ]  <===[ Strait of Hormuz (Transit Passage) ]===>  [ Gulf of Oman / Indian Ocean ]

• Non-Suspendable: Coastal states cannot suspend or hamper transit passage for commercial or military vessels, even during regional diplomatic disputes or state of emergency declarations short of full-scale war.

• Continuous and Expeditious: Ships and aircraft have the right to proceed without delay solely for the purpose of continuous, rapid transit.

• Overflight & Submarines: Unlike innocent passage, transit passage includes the right of overflight for aircraft, and submarines are generally permitted to navigate submerged (provided they follow standard safety protocols).

2. Coastal State Sovereignty vs. High Seas Freedom

UNCLOS grants coastal states (termed "states bordering the strait") specific rights, but strictly limits how far those rights extend:

What Coastal States CAN Do	What Coastal States CANNOT Do
Establish Traffic Separation Schemes (TSS): Designate specific inbound and outbound shipping lanes to avoid collisions.	Levy Tolls or Transit Fees: Article 26 explicitly forbids charging fees on foreign ships merely for passing through.
Enforce Environmental & Safety Rules: Require compliance with international regulations preventing oil pollution and maritime accidents.	Require Prior Authorization: Demanding that commercial or military vessels request permission before entering is prohibited.
Prevent Illegal Operations: Enforce laws regarding smuggling, illegal fishing, customs, and immigration.	Unilaterally Alter Route Control: Forces cannot arbitrarily alter routing to compel foreign traffic into unilateral inspection zones without IMO approval.

3. The International Maritime Organization (IMO) Role

A coastal state cannot simply make up its own rules for an international strait.

Any proposed changes to shipping lanes, mandatory reporting systems, or traffic management must be submitted to and approved by the International Maritime Organization (IMO) — a specialized agency of the UN. This ensures that navigation rules remain standardized worldwide.

4. The Specific Dilemma in the Strait of Hormuz

Applying UNCLOS to the Strait of Hormuz presents a unique legal twist that often comes up in diplomatic negotiations:

The Non-Signatory Nuance:

• Oman ratified UNCLOS in 1989.

• Iran signed UNCLOS in 1982 but never formally ratified it.

• The United States has not ratified UNCLOS, though it recognizes its maritime provisions as Customary International Law.

Because Iran has not ratified UNCLOS, Tehran historically argues that transit rights through its territorial waters are subject to Innocent Passage rather than the broader Transit Passage framework, or that UNCLOS transit passage benefits apply only to states that have ratified the treaty.

Conversely, major shipping nations and international bodies maintain that the right of transit passage through international straits is universally binding under customary international law, regardless of individual treaty ratification.