Iraq, Pakistan strike transit deals with Iran as Hormuz shipping tightens

Iran has reached separate arrangements with Iraq and Pakistan to facilitate the movement of oil and liquefied natural gas through the Strait of Hormuz, five sources familiar with the matter reveal to Reuters. 

The agreements come amid a wider disruption to Middle East energy exports following the U.S.-Israeli war with Iran, which has significantly reduced shipments from a region responsible for roughly a fifth of global crude oil and LNG supply. U.S. forces have also blockaded Iranian ports in recent weeks, further tightening maritime access through the strait.

Analysts say Iran’s approach to the chokepoint has evolved. 

“Iran has shifted from blocking Hormuz to controlling access to it ... Hormuz is no longer a neutral transit route, it is a controlled corridor,” Claudio Steuer of the Oxford Institute for Energy Studies said. 

Under a previously unreported arrangement between Baghdad and Tehran, Iraq secured safe passage for two very large crude carriers, each carrying ⁠about 2 million barrels of crude, which transited the strait on May 10, according to Iraqi officials and a shipping industry source.

“Iraq is a close ally of Iran, and any deterioration in Iraq's economy would also damage Iran's economic interests in the country," the official said.

A second Iraqi oil ministry official and a shipping industry source confirmed ongoing talks aimed at securing further transits. Iraq relies on oil revenues for roughly 95% of its budget, making continued access to export routes critical.

Separately, two LNG tankers carrying Qatari cargoes are en route to Pakistan under a bilateral understanding facilitated through Tehran, according to two industry sources. Pakistan, which previously imported around 10 LNG cargoes per month, faces mounting pressure to meet peak summer electricity demand.

Neither Iraq nor Pakistan has made direct payments to Iran or the Islamic Revolutionary Guard Corps in connection with the shipments, the sources said. Qatar was not directly involved, though it reportedly informed the United States ahead of the Pakistan-bound cargoes.

As shipping patterns shift, observers warn that Iran’s leverage over the strait may be hardening. 

“As more governments become willing to cut deals with Iran for passage, it risks normalising the idea that Iran will control the Strait of Hormuz on a more permanent basis," said Saul Kavonic, head of research at consultancy MST Marquee.

Before the conflict, roughly 3,000 vessels passed through Hormuz each month. That figure has reportedly fallen to around 5% of normal levels, while Brent crude prices have surged by more than 50% since the outbreak of hostilities, with LNG prices up 35% to 50%.

Iran has said it intends to retain control over the strait after the war, demanding reparations, sanctions relief and access to frozen assets as part of any settlement. U.S. President Donald Trump dismissed those conditions as “garbage”, saying they undermine prospects for a diplomatic resolution.

In the meantime, Tehran is reportedly formalising its oversight of shipping procedures through the strait, requiring Iraq to submit detailed documentation for each vessel.

A Pakistani source involved in talks said coordination with Iranian authorities has been inconsistent.

"The IRGC sometimes changes the goalposts, so it is hard to keep things on track, but we are working through it," he said.

By Sabina Mammadli