The decision by the United States not to further escalate its conflict with Iran, alongside a two-week ceasefire, has offered the global economy a brief moment of relief. Both sides have declared victory. Yet as details of the agreement slowly emerge—and remain subject to further negotiation—it is clear that the outlook for global trade is mixed.

A temporary arrangement has been reached for the Strait of Hormuz, one of the central arteries of the global economy. This narrow waterway is critical not only for energy flows but also for the food security of billions. What happens here reverberates far beyond the region.

Since the onset of hostilities involving the United States and Israel, Iran has exercised tight control over navigation through the strait. It has threatened to target vessels linked to its adversaries while guaranteeing safe passage to only a limited number of ships, primarily those transporting Iranian oil to Asia. In practice, the strait has been neither fully closed nor fully open.

The ceasefire appears to ease immediate tensions. Iran is expected to lift its direct threats against commercial shipping. However, it will retain significant control over access. Rather than restoring full freedom of navigation, the emerging “new normal” places decisions over passage largely at Iran’s discretion.

Tehran has also indicated its intention to impose transit fees as a means of compensation for the war. While international law does not permit direct charges for passage, it does allow fees for services rendered (see UNCLOS para. 26). This legal grey area could provide Iran with substantial leverage. Much will depend on the details—particularly the criteria used to determine which vessels are allowed to transit and under what conditions. For now, those rules remain opaque.

A process at the International Maritime Organization will likely be required to puzzle out the details and offer the industry reassurance. How this impacts the risk assessments of the shipping industry remains to be seen. Many shippers are likely to pause their transits and wait to see how the situation develops.

Higher transit costs, increased insurance premiums, and persistent uncertainty will likely raise the price of shipping. Countries heavily dependent on this route will bear the burden, effectively absorbing part of the economic cost of the conflict and essentially paying for Trump’s war.

Diplomatically, the ceasefire marks a success for regional actors, notably Pakistan, which acted as the facilitator, backed by its partners Egypt, Turkiye and Saud Arabia – increasingly known as the Muslim Quad. We are likely to hear more from this new grouping and its strategy not only in the Gulf but also in the broader Indian Ocean.

At the same time, we are facing a moment that underscores the weakening of the multilateral system. The UN Security Council met only hours before the ceasefire was agreed to vote on a resolution that would have implied a broader global agreement for the Strait of Hormuz. It would have provided the foundation for a multilateral mechanism, such as a contact group, that could provide safety in the Strait in the long run. China and Russia used their veto. The failure to adopt a broader agreement highlights growing geopolitical fragmentation. Yet, a Security Council resolution is not fully off the table. After this failure, restarting negotiations will require some time.

The result is not a return to normality, but the emergence of a more politicized and fragile maritime environment—one in which chokepoints are increasingly weaponized and politically controlled. Freedom of navigation will become more and more limited.