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Hello Power Up readers,

We have gotten used to very dramatic events in the energy space over the past few weeks, and this week may top it all. Hours after U.S. President Donald Trump threatened to wipe out a whole civilization and destroy Iran’s power infrastructure, both countries agreed on a two-week ceasefire subject to Tehran re-opening the Strait of Hormuz, the waterway through which a fifth of the world’s oil and gas transits. Both sides declared victory in the six-week war and also agreed to hold talks on a peace deal in Pakistan on Friday.

The deal was scant on details and riddled with problems from the start, not least the fact that both Iran and Israel continued attacks in the hours following the announcement. Markets nevertheless cheered the news, with stock markets rallying and crude oil futures posting staggering declines, with Brent plunging 13% to below $100 a barrel. The two-week ceasefire and the return of oil and gas exports from the Middle East would certainly deliver badly-needed relief to economies battered by the world's worst ever energy crisis.

One day into the nascent truce we’re seeing more signs of stress.  Trump vowed to retain military assets in the Middle East until a peace deal with Iran is reached, Iran threatened to renew fighting after Israel carried out heavy bombing in Lebanon on Wednesday and, crucially, there was scant sign that traffic through the Strait of Hormuz has resumed in any meaningful way, with Iran still asserting its control over the vital artery. Oil prices rose by over 3% on Thursday.

The Iran war may well shape the international legacy of Trump’s second term in office, and it is safe to say it has already reshaped the Middle East. The future of transit through the Strait will in many ways determine the success of the Iran war for both sides.

Tehran has demanded to act as toll booth keeper at the world's most critical oil chokepoint, which would leave energy markets vulnerable and hardwire higher prices for years to come. More on this below.

Here are a few more headlines:

As always, don’t hesitate to contact me at ron.bousso@thomsonreuters.com or follow me on LinkedIn with any questions or thoughts.

Tehran indicated on Tuesday that, under a permanent peace deal, it would seek to charge a fee for ships transiting the Strait of Hormuz, which is just 34 km (21 miles) wide at its narrowest point between Iran and Oman.

With full details of the ceasefire deal still unclear, some media reports indicate that Oman has strongly pushed back, making clear that no such toll regime is acceptable under existing agreements, while others suggest that such a tolling system may already be in place.

Trump said in an interview with ABC News on Wednesday that the U.S. was also thinking about setting up a joint venture to charge ship tolls for access through Hormuz.

How such a scheme would operate in practice remains far from clear. But Iran may hold the upper hand. The conflict has demonstrated Tehran’s ability to strike dozens of vessels using drones, missiles and sea mines - a capability that gives it powerful leverage even without a formal blockade.

An Iranian toll system would ⁠strike at one of the core principles of international law: freedom of navigation, under which ships may transit international waters without interference from coastal states. The United States has historically cast itself as the global guarantor of that principle, enforcing it through naval patrols and diplomatic pressure.