Workarounds Gel Amidst New Threats Of War

Red Sea Futures Weekly Brief — Issue 9

The Strait of Hormuz remained effectively closed during the week ending May 12. Iran submitted a counter-proposal through Pakistan on 10 May demanding US recognition of Iranian sovereignty over the Strait, war reparations, release of frozen Iranian assets, lifting of sanctions, and an end to fighting on all fronts including Lebanon. The proposal made no concessions on Iran’s nuclear program, which was of paramount interest to the US.

Trump rejected the Iranian offer as “totally unacceptable,” and “a piece of garbage”, and on 11 May told reporters the ceasefire was on “massive life support.” On 12 May Trump departed Washington for a three-day state visit to Beijing, telling reporters “I don’t think we need any help with Iran”, though administration officials privately frame the trip as an opportunity to press Xi on Hormuz, and CNN reports some Trump aides are advocating a return to major combat operations against Iran. Brent rose 3.17% on 10 May to $104.50 and rose pursuant to the Iran’s rejection of May 12.

Around the closed strait, four institutional moves are significant —a new Iranian toll authority, a Chinese blocking-statute order, a DP World cargo war-risk product, and a Gulf-producer dark-transit pattern. These facts on the ground may well become permanent features. Qatar meanwhile resumed limited LNG exports on Iranian-approved routes. In the Bab al-Mandeb approaches, Somali piracy claimed a fourth tanker in two weeks; in the Horn, Sudan recalled its ambassador from Addis Ababa.

I. The Negotiations

Three rounds of formal US-Iran exchanges have moved through the Pakistani channel. Trump’s 14-point proposal in late April demanded a twelve-year Iranian commitment to halt enrichment. Iran’s March and May 10 counter-proposals demanded the same thing each time: end the war and the naval blockade, lift sanctions, release frozen assets, compensate Iran for war damages, and recognize Iranian sovereignty over Hormuz.

The nuclear program is not on the Iranian agenda. Hormuz sovereignty and sanctions relief are not on the American agenda. Thus each side is negotiating to a different agreement.

Tehran’s position is that Hormuz is Iranian territorial water and the Islamic Revolutionary Guard Corps (IRGC) Navy may regulate transit. UNCLOS (UN convention on the law of the sea) provides for transit passage through international straits regardless of bordering-state claims, and Iran’s position is rejected internationally. A CIA assessment reported by The Independent on 8 May concluded that Iran can absorb the US naval blockade for months while retaining 70% of its missile inventory.

The Houthi Track

The Oman-brokered cease fire between the US and the Houthis concluded earlier in May covers American vessels in the Red Sea and Bab al-Mandeb; it does not cover Israeli-flagged, Israeli-linked, UK, or EU vessels. Houthi spokesman Mohammed Abdulsalam confirmed attacks on Israel are “not included in any way, shape or form” in the agreement; political head Mahdi al-Mashat said attacks on Israel “will continue.” Lloyd’s of London did not lower Red Sea hull war-risk rates after the announcement; the premium held at roughly 0.2% of insured value per voyage. The harder problem is a case of mixed-ownership, e.g., a Greek-flagged tanker carrying Saudi crude from Yanbu might have a partial Israeli beneficial-ownership chain. The Houthis will decide whether to treat it as a target.

Status of the Strait of Hormuz

The Hormuz front itself deteriorated this last week. On 3–4 May, an Iranian drone strike hit the ADNOC-owned tanker MV Barakah off Oman; ADNOC said the vessel was empty and no injuries were reported. The UAE foreign ministry condemned the strike as “maritime piracy,” and ADNOC CEO Sultan Al Jaber called for unconditional reopening of the strait. On 8 May, the Iranian Navy seized the Ocean Koi, a Barbados-flagged, Chinese-managed tanker designated by the US in February as part of Iran’s shadow fleet — Iran in effect seizing a sanctioned tanker from its own shadow fleet. The same day, US Central Command said the Navy had disabled two Iranian-flagged tankers in the Gulf of Oman. On 10 May, UKMTO reported a drone strike on the Safesea Neha, a Marshall Islands-flagged, US-managed bulk carrier northeast of Doha, the first US-managed merchant ship struck since the peace process began.

II. Sudan, Ethiopia, And The Horn

On Tuesday 5 May, Sudan recalled its ambassador to Addis Ababa following a May 4 drone strike on Khartoum International Airport, residential districts, and military sites. At a joint press conference, Foreign Minister Mohieddin Salem and military spokesman Asim Awad Abdelwahab claimed UAE-supplied drones launched from Ethiopia carried out four strikes since March 1. Ethiopia’s foreign ministry rejected the accusation as “baseless” and counter-accused Sudan of arming TPLF-linked groups for cross-border incursions. The UAE denied involvement, with an unnamed official telling AFP the accusations were “fabrications” intended to “deflect” and “prolong the war.”

On Friday May 8, the Sudanese army’s 4th Infantry Division retook the al-Keili garrison from the RSF — the first reversal on the Blue Nile front since it opened on 25 April. The initial RSF capture was Issue 8’s lead Sudan story. Dabanga assessed the broader RSF Blue Nile operation as a diversion rather than a serious attempt on Damazin; Horn Review noted that with neither side winning the war as a whole, Sudan continues to drift toward de facto partition.

In Tigray, the TPLF managed its own succession. On May 4 the pre-war Tigray Regional Council reconstituted itself; on 5 May it elected party chair Debretsion Gebremichael as Tigray State President, three weeks ahead of schedule. Federally-appointed interim president Tadesse Worede said on May 8 he would respond to the council’s action. The Pretoria agreement that ended the Tigray war in November 2022 is no longer operative. As of May 12, the US Treasury had not designated Debretsion or the council leadership.

Around the same date, the US State Department circulated an internal document stating that the United States would rescind the 2021 Biden executive order imposing sanctions on Eritrea. The leak was first reported by Hiiraan Online and Al Arabiya English; Human Rights Watch objected on 6 May; Semafor reported the rescission as part of a broader Trump-administration plan to reopen relations with Eritrea, with Massad Boulos as envoy. Washington is pressuring the Tigray Front and rehabilitating Eritrea in the same week. The leaked document does not specify whether the rescission is conditional on some specific action by Eritrea.

III. Piracy Grows In The Gulf of Aden

A Somali piracy resurgence ran in parallel to the political and kinetic story. Captain Roy Facey draws the network’s attention to it as the most material non-Houthi maritime-security development in the Bab al-Mandeb approaches. On Saturday 2 May, the 3,300 dwt product tanker Eureka, Togo-flagged and managed by Sharjah-based Royal Shipping Lines, was boarded off Yemen’s Shabwa coast at approximately 5 AM local time by armed men who took control and steered it toward Somali waters. Pirates set out from a remote area near Qandala in Puntland. It is the fourth Somali pirate hijacking in two weeks, following the Honor 25 on 22 April (carrying 18,500 barrels of oil) and two further incidents in late April. UKMTO has raised the threat level off the Somali coast to “substantial.”

The location has raised the question of coordination. The Eureka hijacking took place within Houthi-controlled coastal waters off Shabwa; The New York Times reports that Yemeni and Somali authorities are investigating whether some Yemeni nationals among the attackers had ties to the Houthis (We reported this two weeks ago).

Security analysts have characterised the apparent pattern as a transactional alignment, in which Houthi networks provide GPS and surveillance support while Somali groups supply skiffs and boarding crews. Primary reporting on Eureka stops short of attribution beyond opportunistic piracy. The structural picture is that naval resources have been pulled toward the Hormuz blockade and Houthi response, and Cape-default flows have thinned the Internationally Recommended Transit Corridor.

IV. Four institutional moves

Iran’s Persian Gulf Strait Authority

On or around 5 May, Iran created a Persian Gulf Strait Authority to collect transit fees from shipowners moving through Hormuz. The authority operates under the IRGC Navy, which has run an informal toll regime since the war began; the new body gives it institutional form. The compliance problem for shipowners is that the IRGC is a designated US foreign terrorist organization. The US Treasury issued a sanctions advisory on May 1 warning that any payment to Iran for Hormuz transit, whether in cash, cryptocurrency, offsets, or humanitarian-aid triggers US sanctions exposure. War-risk insurance and US sanctions enforcement now operate as a single combined cost on each transit.

Reuters reported on 7 May, citing three sources and ship-tracking data from Kpler and SynMax, that ADNOC has been moving crude out of the Persian Gulf with transponders switched off — the same technique used by Iran. In April, ADNOC moved at least four million barrels of Upper Zakum and two million of Das crude this way on four tankers, transferred ship-to-ship outside the strait onto Greek-flagged tankers at a $20-per-barrel premium over the official selling price.

ADNOC has cut total exports by more than a million barrels per day since the war began, from approximately 3.1 million pre-war; the covert flow is a small fraction of the lost volume and a pragmatic response to a closed strait. Bloomberg has separately reported that Aramco is conducting limited dark transits alongside its East-West pipeline operations.

DP World’s Cargo War-Risk Insurance

On Thursday 8 May, DP World launched a cargo war-risk insurance product covering the full supply chain from ocean transit through port storage to inland delivery: up to $400 million per shipment, $1 million per inland movement, zero deductible. This is the first such product offered by a terminal operator. Cargo war-risk insurance is currently dominated by Lloyd’s of London, which upgraded the Arabian Gulf to its highest risk rating in the same week.

On Monday May 5, China’s Ministry of Commerce ordered Chinese banks and counterparties to disregard US sanctions on five Chinese “teapot” refineries that absorb the bulk of Iranian crude. Per the London law firm Stephenson Harwood, the order states that the US designations “shall not be recognized, enforced or complied with” inside China. A Chinese bank that refuses to clear a transaction for one of the five refineries, citing the US designation, is now exposed to legal action in a Chinese court. This appears to be the first operational use of China’s 2021 blocking statute; Beijing chose Iranian-crude buyers in a Hormuz-closure environment as its test case.

Taken together, the four moves shift the operating environment from a temporary disruption to a set of institutional facts: an Iranian toll regime, US sanctions exposure for any party that pays it, a Chinese domestic legal shield for Iranian-crude buyers, and a Gulf-producer adaptation pattern in which state oil companies are operating ships under conditions normally associated with sanctions evasion. The arrangements being built around the war are likely to outlast it.

V. Carriers And Oil Markets

On May 8 Maersk reported Q1 revenue $13 billion (down 2.6% YoY), Ocean EBIT negative $192 million, overall EBIT $340 million. Shares fell roughly 4%. The company maintained full-year 2026 guidance at $4.5 to $7 billion underlying EBITDA, citing “different scenarios on the timing of the reopening of the Red Sea and Strait of Hormuz in 2026.” The spread indicates Maersk is not modeling a structural Red Sea return as a base case. MSC and CMA CGM kept wartime Red Sea and Hormuz surcharges in force through 12 May; Drewry reduced available capacity on Asia–North Europe by 3% from April to May, and on Asia–Mediterranean by 10%.

CMA CGM’s reversal of its FAL1/FAL3/MEX Suez-return plan, executed in late January, remains the cautionary signal: a major carrier withdrew a publicly-announced Suez-return plan even with a ceasefire in place, citing “the complex and uncertain international context.” The question now is whether the May rupture in negotiations triggers a second wave of “Cape as default” reroutings on services that had returned.

Port congestion at Jebel Ali in Dubai deepened. Project44 reported on May 7 that import dwell times had reached 64.6 days, up 297% over nine weeks. Captain Roy Facey notes for the network that export dwell times reached 59.1 days in the same period — cargo is queuing in both directions at the UAE’s largest container port, with no clearing mechanism until the strait reopens. Import dwell times at Nhava Sheva were up 155% since early March.

Brent opened the week near $115, peaked at $116 on Tuesday, and slid to $100–101 on Friday — a 6% weekly decline — before rebounding 3.17% on 10 May after Trump’s rejection and rising again on 12 May. Saudi Arabia’s IMF-estimated break-even is $78 to $85; the margin narrowed.

Aramco reported Q1 results on Saturday: net profit $32.5 billion (up 25% YoY), revenue up 7% to $115 billion. The East-West pipeline, which carries crude from the Gulf to the Red Sea port of Yanbu, ran at its full seven million barrel-a-day capacity through the quarter described by CEO Amin Nasser as “a critical supply artery, helping to mitigate the impact of a global energy shock.” Nasser said on Sunday the world had lost approximately one billion barrels of crude exports over the previous two months, warning that reopening the routes was not the same as normalising a market deprived of that volume. The Saudi Ministry of Finance reported a Q1 budget deficit of $33.5 billion, with government spending up 20% YoY. The PIF has signalled adjustments to several Vision 2030 projects.

Qatar resumed LNG exports through Hormuz during the window. The Al Kharaitiyat, a Marshall Islands-flagged carrier managed by Nakilat Shipping, transited on 9–10 May from Ras Laffan to Port Qasim in Pakistan; the Singapore-flagged Mihzem exited Hormuz on 12 May, also bound for Port Qasim. Both used a northern route close to the Iranian coast, outside the normal traffic separation scheme. Reuters reported the cargoes moved under a Qatar-Pakistan government-to-government deal with Iranian approval, as part of confidence-building measures linked to the Pakistan-mediated peace track. As Dr. Michael Brill notes for the network, Qatar required transponders “off” on the loading approach — a precaution consistent with Doha’s view that LNG infrastructure would be an early Iranian retaliatory target if the war resumes. The arrangement is trilateral rather than a Doha-Tehran bilateral, and it sits inside the architecture of the peace talks.

VI. What to watch the next two weeks

Beijing. Trump’s state visit to Xi is the immediate forcing function. It is worth observing whether any economic deliverable from the summit is paired publicly with a Chinese diplomatic gesture on Tehran.

Iran. Will Trump returns to hot war ahead of 1 June, or will the Pakistani channel produce a fourth round? If the talks break down, will Houthi attacks on commercial shipping restart, or does it not need to? Has the Houthi’s own system of straits-metering set as well? Separate reporting points to comparable Iran-Oman discussions on transit arrangements; if confirmed, that would extend the Qatar template to a second GCC counterparty.

Carriers. Whether the May rupture triggers a second wave of Cape-default reroutings on Asia-Europe services that had returned to Suez.

Sudan-Ethiopia. Will the 5 May ambassador recall be followed by a formal break in relations or cross-border military action? Will Egypt, Saudi Arabia, or the United States takes a public position on the tension?

Qatar. Whether additional carriers transit on the same northern route, and whether Iran extends similar arrangements to other Gulf states with limited bypass options.

Piracy. Whether the Eureka hijacking is followed by further pirate activity; whether EU NAVFOR Atalanta adjusts patrol posture; and whether investigators produce findings on Houthi-pirate coordination that would change the analytical frame from opportunistic piracy to political-asymmetric attack.

Institutional moves. Will the Persian Gulf Strait Authority (“PGSA”) publish a tariff or invite a tested transit? Does ADNOC continue running covert tankers, and does Iran target one? Does DP World’s product attract a major cargo book? Does the MOFCOM order produce a Chinese court action against a foreign bank? Any one would alter how global banks and shipping companies write compliance policy.

Tigray and Eritrea. Does the US Treasury designate Debretsion Gebremichael before Ethiopia’s federal government responds with force? Does the Eritrea sanctions rescission attach conditions? Does Washington take a public position on Sudan’s ambassador recall?

Humanitarian conditions. Cholera deaths inside RSF detention sites in El Fasher are over 300 across two months; nationwide cholera in Sudan is past 120,000 cases and more than 3,000 deaths. Approximately 19.2 million Sudanese (40% of the population) are in crisis-level food insecurity; famine is confirmed in El Fasher and Kadugli. The World Food Programme’s Sudan operation is short $610 million through August.

Indicator snapshot — week ending 12 May 2026

• Hormuz / Bab al-Mandeb: 5–6 Hormuz transits/day (Lloyd’s) vs ~7/day in Issue 8; Bab al-Mandeb open; no commercial-vessel Houthi attacks 4–12 May; UKMTO Somali coast threat level “substantial.”

• Suez Canal: ~56 transits/day; YTD revenue $449m vs IMF fiscal-year projection of $6.3bn.

• War-risk hull premium: Red Sea ~0.2% of insured value per voyage; Persian Gulf >5%; Lloyd’s rates Arabian Gulf and Hormuz at highest risk level.

• Port dwell (Project44, 7 May): Jebel Ali import 64.6 days (+297% over 9 weeks), export 59.1 days; Nhava Sheva import +155% since early March.

• Egypt: central bank rate 19%; March inflation 15.2% YoY; pound ~54/USD. Ethiopia: birr ~174 parallel vs 137 official.

• Sanctions: three US Treasury Iran tranches in week; cumulative Iran designations since Feb 2025 over 1,000.

• India: Hormuz crude flow 247k b/d April vs 2.8m pre-war. Japan: second oil-reserve tranche (~20 days) confirmed by PM Takaichi 4 May.

• Trump-Xi state visit: Beijing, 12–15 May.

• Reading: Robert Kagan, “Checkmate in Iran” (The Atlantic, 10 May).

Red Sea Futures Weekly Intelligence Brief · Issue 9 · Coverage period Monday 4 May through Tuesday 12 May 2026 · Produced with expert annotation from the Red Sea Futures network. The full monthly intelligence report — including detailed country assessments, the complete indicators dashboard, insurance and sanctions notices, and client-specific briefings — is available to paid subscribers. Contact us for more

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