U.S. Navy Restarts Strait of Hormuz Escorts as Oil Hovers Near $100
Operational shift comes as Pentagon warns of capacity limits and Iran nuclear talks stall, with Brent crude pricing in persistent supply-shock risk.
The U.S. Navy resumed escort operations for commercial shipping through the Strait of Hormuz on 26 May, guiding a Greek supertanker carrying 2 million barrels and planning to escort approximately 10 additional vessels, even as the service’s top officer has publicly warned that sustained operations will exceed available capacity.
The move marks a significant escalation in U.S. military posture three months after Iran closed the waterway following the 28 February strikes that killed Supreme Leader Ali Khamenei. Brent crude traded near $99-100 per barrel on 27 May, down from an April peak of $138 but still 55% above pre-conflict levels, according to TIME. The strait handles 20-25% of global seaborne oil and 20% of liquefied natural gas trade.
Capacity Strain and Operational Reality
Chief of Naval Operations Adm. Daryl Caudle testified to the Senate Appropriations Committee on 21 May that escort services through the contested strait will “exceed the capacity of the Navy to do that effectively,” according to Breaking Defense. The warning came six days before the first commercial vessel transited under U.S. naval protection.
Traffic through the strait collapsed 95% from pre-war baseline by 12 April, per S&P Global Commodities at Sea. Ten ships transited on 4 May following the Trump administration’s announcement of Operation Project Freedom, but sustained operations remain constrained by naval asset availability and Iranian naval mine-laying.
“There are many things we can continue doing to enhance the blockade, but to actually start doing something where I’m providing escort services through a contested straight will, in my military opinion, exceed the capacity of the Navy to do that effectively.”
— Adm. Daryl Caudle, Chief of Naval Operations
Negotiation Leverage or Escalation Risk
The operational shift occurs as U.S.-Iran negotiations on a memorandum of understanding remain stalled over enriched uranium disposition, frozen asset release timing, and control of the strategic waterway. President Trump stated the deal is “largely negotiated” on 24 May, though Iran disputes that framing, CNBC reported. Secretary of State Marco Rubio added, “We’re either going to have a good agreement or we’re going to have to deal with it another way.”
Fresh U.S. strikes on 26 May prompted Iranian Supreme Leader Mojtaba Khamenei to declare that “America will no longer have a safe haven for mischief and the establishment of military bases in the region,” according to TIME. The strikes coincided with the first escorted transit, raising questions about whether military operations are intended to demonstrate resolve or risk derailing diplomatic progress.
Supply-Side Constraints Persist
Gulf producers shut in 10.5 million barrels per day of crude oil production in April, with no return to pre-conflict levels expected until late 2026, the Energy Information Administration assessed on 12 May. Iraq, Saudi Arabia, Kuwait, the UAE, Qatar, and Bahrain account for the disrupted output.
OPEC+ announced a symbolic 188,000 barrels per day production increase for June on 3 May, but spare capacity forecasts have been revised down to 2.5 million barrels per day for 2027 from 3.8 million, following the UAE’s departure from OPEC effective 1 May. The UAE’s exit after six decades as a member further constrains the cartel’s ability to offset lost Gulf production, per Al Jazeera.
Vitol CEO Russell Hardy stated one billion barrels of oil production would be lost due to the war, with current losses reaching 600-700 million barrels as of 21 April. The International Energy Agency called the conflict “the greatest global energy security challenge in history” in May, according to assessments compiled by the EIA.
Ship insurance premiums increased from 0.125% to 0.2-0.4% per transit in the days before 28 February strikes. For very large crude carriers, this equals approximately $250,000 per voyage through the strait—a cost amplified by the Navy’s inability to guarantee complete protection against Iranian mines and missile threats.
Houthi Wild Card
Houthi forces in Yemen have not resumed Red Sea attacks since April but have signaled readiness to close the Bab el-Mandeb strait if the Iran-Lebanon conflict escalates or Gulf Arab states join the war. Ahmed Nagi, senior Yemen analyst at the International Crisis Group, told PBS NewsHour that “if we see more pressure on the Iranians, or there’s any escalation, the Houthis will jump in harshly.”
A dual closure of Hormuz and Bab el-Mandeb would force tankers around the Cape of Good Hope, adding 3-4 weeks to delivery times and further tightening global supply. The UK Times reported on 16 March that Houthis are awaiting an Iranian signal to resume attacks, creating a two-front maritime risk for energy markets.
What to Watch
The trajectory of U.S.-Iran negotiations over the next 7-10 days will determine whether escort operations become a sustained commitment or a short-lived signaling exercise. Key indicators include whether Iran permits non-U.S. commercial traffic to transit without escort, whether the Navy expands the number of protected vessels beyond the initial 11, and whether additional U.S. strikes occur during the negotiation window.
On the supply side, monitor whether Gulf producers begin restoring shut-in capacity in June as the EIA forecast assumes, or whether security concerns delay the ramp. Brent crude’s inability to break below $95 per barrel despite ceasefire announcements suggests markets are pricing in persistent geopolitical premium rather than imminent normalisation.
Finally, watch for any Houthi activity in the Red Sea. A coordinated Iranian-Houthi closure of both strategic waterways would fundamentally reshape global energy flows and likely push Brent above $120 per barrel within days.