Current Market Outlook

The market gives this a 4% probability, which means traders see it as a long shot. For context, the Strait of Hormuz typically sees between 60 and 80 daily transits during normal months, so the threshold of 50 is well below the historical average. A 4% price suggests the market expects significant disruption to shipping traffic in July 2026, not a return to normal operations.

Key Factors Driving the Odds

The Strait of Hormuz is the world's most important oil chokepoint, handling roughly 20% of global petroleum transit. The low probability reflects three realities:

First, Iran has repeatedly threatened to close the strait in response to sanctions or military conflict. Since October 2023, Houthi attacks in the Red Sea have already disrupted shipping through the Suez Canal, and traders are pricing in the possibility that Iran extends similar tactics to Hormuz by mid-2026.

Second, the July 2026 date coincides with Iran's presidential election cycle and potential nuclear deal deadlines. The IMF PortWatch data tracks actual transit calls, not just oil tankers, so any military escalation that blocks commercial shipping would crush daily counts.

Third, the market is pricing in a specific scenario where traffic drops below 50 daily transits for an entire month. That would require sustained disruption, not just a one-day closure. The last major Hormuz disruption was in 2019, when daily transits fell to roughly 55 during the tanker seizure incidents.

What Could Change These Odds

A diplomatic breakthrough with Iran over its nuclear program could push this market to near zero. The US and Iran held indirect talks in Oman in early 2025, and a formal agreement would reduce the risk of Hormuz closure.

Conversely, if Iran accelerates its uranium enrichment or the US reimposes snapback sanctions at the UN in late 2025, the probability could jump to 20-30%. Israeli strikes on Iranian nuclear facilities would push it even higher.

The key date to watch is October 2025, when UN Security Council sanctions on Iran expire. If the US fails to extend them, Iran could face less international pressure, making Hormuz disruption more likely by July 2026.