Iran And Oman May Redraw Maritime Rules

A 21-mile-wide passage can move the world’s energy markets, and the Strait of Hormuz is the clearest proof. We sit down to unpack why this chokepoint keeps returning to the center of global geopolitics, oil shipping risk, and investor anxiety and why trying to treat it as “just a strait issue” quickly turns into a much bigger Iran question.

Clem Miller lays out a provocative idea: a new regional equilibrium may be forming where Iran and Oman share a role in administering the strait, with other Gulf states quietly supporting the arrangement because continued escalation threatens their assets and stability. We talk through the geography that makes Oman unavoidable, what cooperation could look like in practice, and why leverage matters as much as firepower when the goal is to keep tankers moving and avoid a spike in oil prices.

We also debate something most headlines skip: what counts as “war” when nobody declares it. From modern precedents to today’s blurred lines, we focus on the outcomes that shape policy and markets. Then we zoom out into maritime rules, including the Law of the Sea, territorial waters, exclusive economic zones, and the tricky question of fees or shared governance in narrow channels.

If you care about freedom of navigation, Iran sanctions, Gulf security, and how geopolitical risk shows up in investing, this conversation will sharpen your framework. Subscribe, share this with a friend who follows energy markets, and leave a review with your take on shared control of Hormuz.

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Transcript

Why Hormuz Matters Now

Steve Davenport 0:26

Hello everyone and welcome. This is Steve Davenport from Skeptic's Guide to Investing, and I'm here with the Honorable Clem Miller. Uh and we are discussing the Strait of Hormuz, something different for the last four months. And we're trying to look at it as is a strait separate from Iran? Um, or is it all of what Iran is about right now? And I think it's pretty hard for us to separate attacking Iran and getting and influencing them to try to improve oil flow, but it's it it hasn't really worked, so I'm not sure that this time is different. Tell me, Clem, is this time different? Or how do we look at this strait of our moves today after everything that's happened?

Clem Miller 1:26

Okay, so first of all, and I'm not sure, you know, depends on I don't know if you would agree with me or not, but I think it's clear at this point that this war has not been won by the Tr p administration. Uh, it has not been won by the Netanyahu administration, and

A New Iran Oman Equilibrium

Clem Miller 1:50

the and all the regional players in the Gulf, you know, Saudi Arabia, Kuwait, UAE, , and then Pakistan and you know, Qatar, obviously, Pakistan, , even Egypt, are trying to bring about some kind of a you know status. Um I would say they're not trying to go back to the status quo because that's not possible anymore, but they're trying to create like a a new reality that's a new equilibri . Let's call it that, a new equilibri . And the new equilibri is one where the two countries on either side of the Strait of Hormuz have a role in administering it, and that the straits would be open to shipping through that strait, you know, provided that the rules that are being set forward are not violated by the United States or by Israel. And so that's where we are right now. So why is Oman invited, right? You know, people might say, well, what is first of all, a lot of people may have no idea what Oman is, right? Oman is a country, Arab Gulf state, , also on the Arabian Sea, , which is a part of the what they call the Gulf Cooperation Council, GCC, six-member council of the Gulf Arab States, Gulf Arab monarchies, I should say, Saudi, Kuwait, Qatar, UAE, Oman, Bahrain, and Oman happens to have a peninsula that sticks up into the Strait of Hormuz, and therefore parts of the passageway that go through the Strait of Hormuz also enter Omani territory or just off Omani territory, just as parts of the Strait of Hormuz are off of Iranian territory. So Iran, I think, realizes this geographic reality and has tried to create a sort of to use a term that's been used in other geopolitical aspects, a condomini approach where they both run they both run the strait either together or you know separate pieces of it. Um and so they're trying to create like a cooperative approach. And you know, since Oman is part of the GCC, one has to pres e one has to pres e that Saudi, UAE, Kuwait, Bahrain, Qatar have been consulted about this and are at least okay with the arrangement. Now, why would they be okay with the arrangement? Because this war that that the U.S. and Israel have waged on Iran you know resulted in severe damage to infrastructure and assets, not just U.S. bases, but other assets in those countries, in those Gulf countries. And so and so they don't want to have that continue. In fact, , you know, allegedly Tr p was going to call was going to have another big attack last weekend, and supposedly he called it off after the crown prince of Saudi Arabia, the effective ruler of Saudi Arabia, MBS, , called him and said, Hey, we don't want you to do this because there's something in the works. So that something in the works may have been this Iran Oman deal.

Steve Davenport 6:01

Yeah, can we start it? Like one question I have throughout this last five months is do we call it a war? I mean, doesn't a war have to be two countries declare, you know, that they're in a state of war between this country and this country, so that the rules of engagement in war are what's play in place versus I decide

What Counts As War Today

Steve Davenport 6:25

to attack you one day and you decide to attack me the other day. Um, but nobody declares a war. We just say we're trying to, you know, limit the development of new like Is it a war if two people just start you know attacking each other but don't have any intent of actually you know taking over the country? I mean, we're not we're not gonna land troops anytime soon, and they're not gonna land troops in the US anytime soon. So are are we at war if we're not really at risk of of losing our autonomy? I mean, how do you look at the the the the lack of a declaration of war and whether it's I I I don't consider this a war, do you? Well, I mean are you are you at risk of Iran coming here and taking over?

Clem Miller 7:19

Well that's that's really not the definition of war, okay. So let me say say this. Would was World War II a war? Yes. Would you think the U.S. was at risk of being taken over?

Steve Davenport 7:37

Um I think when they attacked Hawaii, that was viewed as a U.S. asset that the Japanese weren't gonna take over Hawaii. They were gonna take over continental U.S., but they were gonna they were attacking a U.S. state.

Clem Miller 7:51

And they attacked Philippines and and they actually occupied two Alaskan islands in the Aleutians.

Steve Davenport 7:59

Right. So you're making my point five.

Clem Miller 8:01

No, but still, I mean that's like, you know, it's not like they it's not like the U.S. was I my basic point is that is that a war can happen regardless of whether there's an intended occupation or not, right? It can happen regardless. And also if you look at one definition And you can't and you can't look at, I mean, you could say, okay, well, the US ended up occupying Japan at the end of the at the end of the of World War II. But you can't, that's like looking backwards and saying, well, I mean, did we know in 1941 that we were going to end up occupying Japan? No.

Steve Davenport 8:40

But then we declare a we have a formal declaration of war against the country. Uh well, I think what happened after Pearl Harbor, we declared we declared war on Japan.

Clem Miller 8:52

We declared war and and then Germany declared war on us, and then we declared war. But you know what? Those things are kind of like you know prehistoric, 19th century, early 20th century, that's a long time ago. And you know, did we declare war on Korea? No, the UN had a quote police action, right? Did we ever declare declare war on on Vietnam? No, there was a a Tonkin Gulf resolution or whatever, , which wasn't really a declaration of war. Um, did we declare war on Iraq? Not really, okay.

Steve Davenport 9:34

Um so I I thought that Bush had to get some support from Congress for the funds to to fight after a certain amount of time.

Clem Miller 9:44

Yeah, well that's different, okay. You need to you always need to get funds to fight, but that's not a declaration of war.

Steve Davenport 9:51

I thought Bush had a declaration of war with Iraq.

Clem Miller 9:55

There was after after 9-11, there was there were some laws passed that basically established a global war on terror. And Iraq was kind of stuffed in underneath that that resolution, right? Okay. Um but that's but it there wasn't like any kind of resolution that that authorized you know that authorized attacking Iraq in two thousand in two thousand and and three, okay. So go.

Steve Davenport 10:34

I'm just I'm just asking a question. If you you think it's a war, I'll I'll call it a war, but it it doesn't feel like it's a real war. It feels like an aggressive action by Israel in the US against Iran and its cont constituent you know parties.

Clem Miller 10:55

And so I I would say I would say it's a war, right? Okay, okay. I would say it's a war. It's you know, it's a war between among states, okay. Um I mean if it were like just a terrorist group, that wouldn't be a war, but it's a war among countries. And so I would say I would say it's a war.

Steve Davenport 11:20

So Israel attacking Hezbollah is not a war.

Clem Miller 11:24

Uh not really, okay. Um I I wouldn't say I wouldn't say that's a war. Um I would say, I mean, you could say that Israel in attacking Hezbollah was really attacking Lebanon, and therefore that was an interstate war. Uh, but you know, I mean, I guess I'm gonna change, I'm gonna come back and say, I think you're right that if I mean I think if what you're saying is you can have you can have governments engaged in wars against subnational groups, I think you yeah, I think there's a logic to be said that that's a war. So Gaza would be a war because it was US versus Hamas, I mean Israel versus Hamas, , that would be a war. Um Hezbollah, that would be a war. But you know what? We're getting into like you know, angels on a head of a pin. I know, okay. That's what we're getting into, right? And and so whether something's a war or not, the best thing to do is simply just to describe what's going on. Right. And honestly, I mean, whether it's a war or not, our objectives in going in, like knocking out the Iranian leadership, , getting out , you know, getting out the nuclear materials, , you know, those objectives weren't met. And it just made things worse because Iran was able to take over the Strait of Hormuz. So this is a war that or conflict or however you want to describe it, that was lost very early on by the US and Israel. And and so it's all a question of how do you how do you reach a mutually acceptable equilibri ? And I think I think we maybe this this situation where Iran and Oman control the straits, and that's being supported by the Gulf states, I think maybe getting closer to an equilibri . But we'll see if we'll see if the U.S. agrees with that. And then of course, you know, Israel's gonna take a standoff position and say, well, you know, nobody nobody got our approval for this, so we're free to do what we want. Uh, which has really been Israel's perspective in Gaza as well and with Hezola. You know, you guys can you you guys can agree on whatever you want, but you know, we're maintaining our freedom of action, which you know, obviously Netanyahu wants to do because of his of his right wing.

Steve Davenport 14:10

Well so if he's at war, he he thinks he has a better chance of re-election, right? Right. Um, so my my interest in this area is I don't really understand or know much about Oman. Is Oman religiously similar in being Shia

Why Oman Works With Iran

Steve Davenport 14:45

to Iran? Is it like how how is it Oman and Iran as partners? Are they partners because they just have oil and they they won't, you know, or is there any underlying reason why they're allies other than the fact that they just have to be across a body of water that's important to both of them?

Clem Miller 15:10

Well, so historically Oman and Iran have had good economic relationships over time. So I think I think that's where it would stand. They don't have a a cultural or religious affiliation, right? It's not like it's not like you have with the Hezbollah and some of the Iraqi groups being Shiite or Yemen being Shiite, much much of Yemen being Shiite. You don't have that with Amman. Okay. But Oman is man has ties with economic ties that go back a long way with Iran. And if you go back even further, there have been, I mean, like I'm talking hundreds and hundreds of years, , there was a lot of Iranian influence in Oman and then through southern Arabia and then down along the East African coast. And so, you know, maybe there's some residue of or you know residual connection that's felt through through that. But basically it's it's it's economic ties and this would fall into that realm of economic ties.

Steve Davenport 16:36

Okay. So you think that both of them being economic creatures would probably do things that are good for each other, and this would be something that could last versus this is just something that the negotiators push together and there's really yeah, no, I think this is I think this is very logical.

Clem Miller 16:56

If if you're going to have a world where straits are where adjacent adjacent countries to straits have some role in administering them, some role, right, in administering them, this makes a lot of sense that that Iran and Oman would work together on this. Makes makes a lot of sense.

Steve Davenport 17:19

So I was reading about the Jones Act, and that basically this kind of disallows or dis breaks down the relevancy of the Jones Act. Can you just talk a little bit about how this is different than the typical Jones Act? I think it means that they're basically saying that they have some authority over this water that doesn't usually exist beyond their, you know, the first three miles of what or whatever of their coastline and they're trying to take because they didn't create this

Law Of The Sea And Straits

Steve Davenport 17:52

street. They didn't they didn't spend money to take it out. So they don't really have the rights to any kind of seafaring, you know, tariffs or fees, right?

Clem Miller 18:06

Uh so there's a well, I don't I'm not sure I understand I'm not sure I see the relevance of the Jones Act. I mean the Jones Act is a law in that applies only in the United States, and and it applies to, and therefore there's no, you know, there's nothing you can say from the Jones Act that it would apply to the Gulf. It only applies to the United States. And what it says is that, you know, outside of wartime, you know, you could only have and and periods when there are exceptions made, like there, they just recently made one, an exception. Um that well, you could say, you know, there's an example of wartime. They basically suggested there is a war by making a six an exception to the Jones Act. But the Jones Act is one where it requires U.S. made ships to deliver things within U.S. from U.S. port to U.S. port. Anything that goes from between a U.S. port and a U.S. port has to be delivered on a U.S. manufactured ship. That's the Jones Act. Okay. And exceptions are made only you know, only during wartime. And , you know, I remember I remember the Jones Act used to be a you know a very significant issue on some when I was working at Eximbank, it used to be a very significant issue for you know for some Eximbank transactions because they couldn't go forward if you didn't have you know Jones Act shipping between one place or another. Um so that's that was the Jones Act. Um if yeah, I think the the bigger issue here is how this fits into the Law of the Sea, which is a treaty that the the UN came up with and a lot of countries signed on to. And the whole idea behind the law of the sea was to basically create it was to balance freedom of navigation and economic rights. And so, you know, it used to be before the law of the sea, well before the law of the sea, you had this rule that that basically territorial waters were three miles, three nautical miles, right? And that was the distance where you could shoot a cannon. That's where that came from. Uh and and and then and then some at some point it got extended to 12 nautical miles, and that remains today territorial waters, 12 nautical miles. But then they added on to it a new thing called the the economic zone, right? Exclusive economic zone, , where basically if you like let if a fish trawler is going through somebody's economic zone, exclusive economic zone, you you have to pay for any fish that are caught, you have to pay some you know some fee, right? So essentially what's happening here is that is you know, if you want to use that kind of analogy, Iran and Oman are essentially saying that there's and you know that they're applying an exclusive economic zone to the to the straight of horror moves.

Steve Davenport 21:30

Okay. Uh that kind of makes sense, it's 21 miles wide. Right.

Clem Miller 21:34

So each of the 12 mile points is now the law of the sea made kind of an exception to that when it came to straits and channels, , as I understand it. Uh and and so they said that there, you know, there's freedom of navigation in certain areas where you know where there are where there's narrow channels, right? Um, and allowed for states on either side to to draw up dividing lines that were based on think they had concepts like baselines and you know, where there were all sorts of like geometric angles that they would have to agree to.

Steve Davenport 22:15

Yeah.

Clem Miller 22:15

And and so I think this this is really you know, this is really a case where where that the old style of like dividing up things by lines may be replaced by or overridden by the idea of an of an exclusive economic zone or shared a shared economic zone applying to Iran and and Oman. as you go through the the strait. So I mean there's a lot of I mean so you know I'm not an expert on international law by any means, but you know I think one would have to to parse through international law, the law of the sea treaty, and see you know if if there's a basis there for being able to use exclusive economic zone as a justification for for you know doing what Iran and Oman are doing. I think they'll try to make the arg ent or Iran will try to make the arg ent whether it's successful or not I don't I really I really don't know.

Steve Davenport 23:21

I mean is Oman do you think interested in collecting fees from these boats that are going by because it's I mean it feels like this concept has gone a little bit further than it should based on the rules that everybody thinks are in place, right?

Clem Miller 23:38

My my understanding I was very surprised I just learned about this recently is that the Strait of Malacca you know we're between Indonesia and Singapore and Indonesia and Malaysia the Strait of Malacca actually has

Fees Leverage Sanctions And Spillover

Clem Miller 23:53

a some kind of a regime where there are voluntary fees paid voluntary is the key word voluntary fee fees paid for environmental maintenance and other things having to do with the strait and so I know there's been some talk about having something similar with with Iran and Oman but yeah I I think the main issue here is that is that Iran wants to use the Strait of Hormuz as leverage right they want to say we're gonna close it again if the US and Israel attack us that's what they want right I don't think they want to really keep it closed to traffic I don't think they want that you know is are the fees that significant to them well if they manage to get sanctions lifted in general and are allowed to to export their own oil how important are those fees to them not that important right well that hasn't then that that been pulled back though the sanctions yeah well yeah just a couple days ago I saw a notice that that the US was pulling back sanctions on Iran on the at least the Iranian oil exports okay we'll see I mean it's a kind of a weird situation we're like supposedly blockading their ports at the same time as removing sanctions explain that one to me I don't know there's there's so much happening here clean that I think that it's good that we go back and try to understand these things a little bit more and I guess I I look at what's going on with the Houthis and and the other side on the Red Sea and I see you know more confusion because when when they say that there's you know a peace agreement in place and then the next night they bomb two or three you know ships that are going by right so yeah I don't I don't know what peace means if if peace means you and all of your allies or peace just means that you're not gonna bomb anyone but you're you know to make it even and to make it even more crazy right you had this Iranian ship delivering weapons to Russia in the Caspian Sea that was hit by a Ukrainian drone.

Steve Davenport 26:19

What that was one of my favorites because I'm sitting there going couldn't we just leave Ukraine and Russia by themselves instead of turning this into you know is this possibly world war three well I'll tell you what you know if if Russia were to attack NATO directly I think that would be World War III okay so and I and so far Russia has been they attacked Poland well I don't think that was a an intentional missile attack and Poland isn't treating it that way but they have engaged in they violated the airspace right yeah hybrid warfare they've engaged in like drones and and just not drones for not attract attack drones but observational drones and things of that nature they have been probing let's call it that probing we can find the adjectives to describe this but it these are these are actions that are from one nation against another nation right so you're calling it war then right no i'm just saying that you're you're creating new words i i've never heard tr p talk about probing in poland you know what i mean i i don't remember anybody ever saying you know that little mario was you know probing with poland the i i i look at these things clemented i just think we're all of us are entering a different time and it's a different way to to handle things in the world because we seem to have forgotten that wars cost money and all of these countries including the U.S. are pretty filled up with debt so if we're spending more money on war I gotta ass e there's some you know economic interest and I don't see how Tr p's idea of taking Carg Island or anything else is is really is really reasonable. So I don't I don't see any of these actions really you know coming to a result that's gonna be happen make everyone happy. So I think it's just a question of when you come to an agreement everybody should be a little bit unhappy and that means everybody's had to give something. And so maybe this is giving them authority over this waterway that they have some authority over now because of their shorelines seems like it's possibly the answer to some of the problems but it really just answers the street problems.

Clem Miller 29:09

I don't know if it answers the ruling party and the nuclear weapons and the sanctions but no you have anything else you want to add on this or no I think we've we've covered it I'm sure this is not going to go away so we'll be back to this at some point.

Steve Davenport 29:26

All right everybody thanks for listening and we're gonna try to do more short podcasts because we know that people's time is valuable and cover more topics. So I hope you like this and let us know. Thanks