Asia’s way out of the Hormuz deadlock

On November 11, Iran’s chief negotiator, Mohammad Bagher Ghalibaf, said the Strait of Hormuz will “never return” to its pre-war status, that Tehran has reached an understanding with Oman on managing it, and that Washington has yet to respond to Iran’s seven conditions.

Two days earlier, US President Donald Trump called the war “militarily effectively over” but said the US naval blockade at Hormuz would remain. Each side waits for the other to move first because neither expects the other to keep its word.

Asia’s oil importers, whose leaders meet in Shenzhen, China, for the APEC summit on November 18 and 19, are well positioned to change that calculation.

Asia has paid most of the cost of the closure. In 2025, nearly 15 million barrels a day of crude passed through Hormuz, and China and India alone received 44% of it, according to the International Energy Agency.

The Middle East supplied 94% of Japan’s crude imports last year, and 93% of that volume came through the strait, according to Japan’s trade ministry. Bangladesh, India and Pakistan imported almost two-thirds of their liquefied natural gas via Hormuz. On November 5, Brent rose US$3.67 to $98.29 a barrel after renewed tanker attacks.

The talks lack enforcement, not proposals. The Islamabad Memorandum of Understanding, which Pakistan helped broker alongside Qatar in June, collapsed within a month amid renewed strikes.

Iran now wants to ensure that released funds cannot be frozen again, while US officials insist any deal be performance-based, with no money flowing until Iran delivers. A durable deal needs a mechanism that pays Iran for an open strait over time and lets Washington verify compliance before money moves.

Transit fees cannot do that. Reuters has reported that Iran sought fees of 5% to 7% of cargo value, that Oman has discussed about 3% and that Washington wants none. Insurers have added war-risk clauses that cancel cover for ships paying such fees, and leading shipping associations have called compulsory charges a toll “in all but name”. A fee regime would keep the strait legally contested and give Washington grounds to reject any deal.

Asian importers should pay Iran for oil rather than for passage. Japan, South Korea and India, which stopped buying Iranian crude after 2018, would resume limited purchases under a US sanctions waiver. Payments would go into local-currency accounts in the buyers’ own banks, usable only for Iran’s imports from those countries.

Under US waivers between 2013 and 2015, and briefly in 2018, buyers could import Iranian oil as long as they held the revenue in local-currency accounts. The new waiver would add one condition: toll-free, non-discriminatory passage for all ships, verified by public tanker-tracking data.

This gives Iran a stronger incentive than tolls. Iran shipped 1.69 million barrels a day of crude through Hormuz in 2025, and US Central Command says the blockade has kept more than $25 billion of Iranian crude off the market.

An open strait would restore exports and steady income from three large buyers, while a closure would end both. Tehran has shown interest: its national oil company approached Japan and other former customers in July about resuming sales.

Iran’s objection would not be only financial. Ghalibaf has said the United States has no right to control the strait and must leave, and Tehran’s conditions include a reduced US military presence.

The arrangement can partly meet this by accepting Iran-Oman management of the shipping lanes, provided it follows Oman’s own proposal for regional management with only voluntary fees. It cannot meet the demand for a US withdrawal, and hardliners may reject any deal that leaves the blockade’s architecture in place.

Both sides would see risks. Iran’s oil revenue in South Korea, about $6 billion, was moved to Qatar in 2023 and blocked again after the October 7 attacks under a “quiet understanding” between Washington and Doha.

Funds spent continuously on imports would leave far less money exposed, and canceling the waiver would cut supplies to three US partners, raising Washington’s cost of reneging. Critics in Washington, Israel and the Gulf, who, Trump says, support maintaining pressure, will argue that any revenue helps Tehran rebuild its military.

Restricting payments to goods from buyer countries, capping volumes, and auditing accounts would reduce, not remove, that risk. The choice is between a limited, monitored flow of revenue and an open-ended blockade.

Washington is the harder sell. Trump has kept the blockade as leverage and set up a new Central Command task force on November 7 to tighten it. Yet the standoff is costly at home.

AAA put US gasoline at $3.98 a gallon and diesel at $6.16 on November 10, roughly 30% and 65% above a year earlier, and Trump has acknowledged the war’s role in his party’s sweeping midterm losses.

The arrangement would let him lift the blockade on terms that meet his own test: no cash would reach Tehran, payments would stop if the strait closed, and the waiver would expire unless renewed.

The proposal fits Tokyo’s position. Foreign Minister Toshimitsu Motegi has said Japan is not considering unilateral talks with Iran and wants conditions that allow all ships to pass. But Japan-China relations are at one of their lowest points since 1972, so the arrangement would have to be negotiated through Washington.

Beijing’s role would be limited to not blocking it. Iran supplied about 13.5 percent of China’s seaborne crude imports in 2025, and Beijing is unlikely to route those purchases through US waivers.

But Xi Jinping offered in May to help reopen the strait, and he and Trump agreed then that Hormuz must remain open. Their meeting in Shenzhen gives Beijing a chance to signal acceptance and urge Tehran to engage.

The arrangement has clear limits. It does not resolve the nuclear dispute, the fighting in Lebanon, or Iran’s demand for sanctions relief. It also depends on cautious banks, since Iranian escrow accounts in South Korea were misused in a 2011 sanctions-evasion scheme. It would keep the strait open while wider issues are negotiated, not replace a peace agreement.

Pakistan’s mediation in June showed that Washington and Tehran can sign a common text, and its collapse showed that signatures alone do not hold. Islamabad, as a mediator and an importer dependent on Gulf energy, could encourage both sides to consider the arrangement.

Paying Iran for oil rather than passage would give Tehran a commercial reason to keep the strait open, give Washington a way to verify it and give Asian importers a more stable supply. Asian leaders should put the offer on the table in Shenzhen next week.

Bilal Habib Qazi, PhD, is a research analyst at the Institute of Regional Studies, Islamabad. The views expressed are his own and do not necessarily reflect those of the institute. He can be reached at bhqazi@gmail.com.