Iraq and Pakistan Strike Iran Transit Deals to Move Oil and LNG Through Hormuz

Why It Matters

The agreements restore vital energy supplies for two vulnerable economies and signal Iran’s emerging role as a gatekeeper of Hormuz, reshaping regional logistics amid the conflict.

Key Takeaways

• Iraq secured transit for two VLCCs, ~2 million barrels each.
• Pakistan received two Qatari LNG tankers to meet summer demand.
• Iran now controls, not blocks, Hormuz traffic, normalizing its influence.
• No direct payments to Iran; deals rely on diplomatic coordination.
• Reduced vessel traffic to ~5 % of pre‑war levels, driving price spikes.

Pulse Analysis

The war sparked by the United States and Israel against Iran has dramatically curtailed the flow of oil and liquefied natural gas through the Strait of Hormuz, a chokepoint that normally handles about 20 % of global crude and a comparable share of LNG. Since February, vessel traffic has collapsed to roughly five percent of its pre‑war average, pushing Brent crude up more than 50 % and lifting Asian LNG prices by 35‑50 %. With the strait no longer a neutral passage, Tehran has begun to leverage its geographic advantage to shape regional energy logistics.

In that environment, Baghdad negotiated a transit agreement that allowed two very large crude carriers—each loaded with roughly two million barrels—to sail through Hormuz under Iranian supervision. The shipments are critical for Iraq, where oil revenues fund about 95 % of the national budget. Meanwhile, Islamabad secured a separate pact that cleared the way for two Qatari‑origin LNG tankers bound for Pakistan, helping the country meet soaring summer electricity demand without making direct payments to the IRGC. Both deals illustrate how neighboring states are adapting to a fragmented market.

The emerging pattern suggests Iran is shifting from outright blockage to a controlled corridor model, a move that could institutionalize its role as a de‑facto gatekeeper of Hormuz. If more governments formalize similar arrangements, the perception of Iran’s authority over the strait may become normalized, potentially reshaping global supply chains and prompting new risk‑premia in shipping insurance. Energy traders and policymakers will therefore watch closely for any further concessions, as they could either stabilize regional supply or entrench a geopolitical lever that complicates diplomatic efforts to resolve the conflict.