US and Iran weigh phased deal to reopen Strait of Hormuz after fatal strike on cargo ship

American and Iranian negotiators meeting on the sidelines of the United Nations General Assembly in New York are exploring a phased arrangement that would see Tehran reopen the Strait of Hormuz in exchange for Washington easing the naval blockade and economic sanctions it has imposed on Iran, according to people familiar with the talks. The discussions, first reported by Reuters on Thursday, mark the most concrete diplomatic movement in weeks toward ending a nearly seven-month conflict that has kept one of the world's most important oil chokepoints closed to normal traffic since February.

The talks came hours after a bulk carrier was struck by an unknown projectile inside the strait, killing an Indian seafarer and forcing the evacuation of the rest of the crew — a reminder of how far the two sides remain from a settlement even as both signal fatigue with the standoff. Neither Washington nor Tehran wants to be the first to give up leverage, according to officials briefed on the negotiations, which is why the emerging proposal is structured in phases rather than a single swap.

The numbers behind the standoff

Before the conflict, the Strait of Hormuz carried roughly a fifth of the world's daily crude oil and liquefied natural gas exports, according to figures cited by Iranian and American officials at the United Nations this week. Since Iran effectively closed the waterway to commercial shipping following the outbreak of fighting with the United States on February 28, throughput has collapsed to a fraction of that volume, with tankers rerouted around the Arabian Peninsula or left waiting outside the Gulf.

The human cost has climbed alongside the economic one. The International Maritime Organization's running tally of the crisis listed 22 incidents involving deaths or injuries to seafarers as of Thursday, with at least 21 fatalities recorded since the fighting began. The most recent came Wednesday, when the Antigua and Barbuda-flagged bulk carrier Cape Dao was hit by a projectile roughly two and a half nautical miles off Oman's Musandam Peninsula. A fire broke out in the engine room; the Royal Navy of Oman evacuated 27 surviving crew members. The Forward Seamen's Union of India identified the seafarer killed as Suraj Yadav, 26, a wiper from Uttar Pradesh.

On the financial side, the Treasury Department's campaign against Iran's finances, which it calls Operation Economic Outcast, has designated nearly 60 individuals, entities and vessels since late August across a shadow fleet accused of moving millions of barrels of sanctioned Iranian oil. The Treasury's sanctions office announced on September 10 that it would treat new Iran-related license applications with a presumption of denial, tightening the economic vise that Tehran wants lifted as part of any Hormuz arrangement.

How the standoff developed

The current conflict traces to February 28, when fighting broke out between the United States and Iran after months of rising tension over Tehran's nuclear program and regional proxies. Iran's closure of the strait to most commercial traffic followed, choking a route that normally carries the bulk of Gulf oil exports to Asian and European markets. An interim peace understanding was signed by President Trump and Iranian President Masoud Pezeshkian in June but collapsed within weeks, and a follow-on arrangement between Iran and Oman for a temporary, internationally compliant shipping corridor through the strait — announced in late August — has yet to translate into a full reopening.

Washington has continued to press Tehran through sanctions rather than direct military escalation in recent weeks, while Iran has signaled openness to talks without abandoning its core demands. A senior Iranian official said this week that Tehran could reopen the strait within seven days if the United States formally committed to easing the blockade and agreed on a negotiating timeline — an offer that underscores how much of the impasse now rests on sequencing rather than substance.

Much of the recent contact has run through third parties rather than direct US-Iran channels. Qatari mediators have carried messages between Washington and Tehran around the General Assembly session, and Iranian Foreign Minister Abbas Araghchi met with US special envoy Steve Witkoff earlier in the week on the sidelines of the UN meetings, according to officials familiar with the encounter. Oman, which brokered the temporary shipping-route arrangement with Iran in August, has continued to resist US pressure to sever its own contacts with Tehran, insisting its role is limited to negotiating a management system for the strait that is compliant with international law.

The closure has rippled well beyond the Gulf. Global oil and gas buyers have absorbed higher freight and insurance costs as tankers divert around the Cape of Good Hope or sit idle awaiting safe passage. Gulf Arab states whose economies depend on the strait's traffic have pressed hardest for a resolution, while seafarers — many of them from India, the Philippines and other labor-exporting nations — have borne the direct physical risk, with dozens killed or injured in strikes on commercial vessels since the war began.

Iran's own economy has also absorbed damage from the blockade, which officials in Tehran say has choked oil exports and access to foreign currency reserves — the pressure point Iranian negotiators are now trying to trade away in exchange for reopening the strait.

Reaction at the United Nations

The diplomatic backdrop sharpened Thursday when a coalition of roughly 80 countries, in a statement read at the General Assembly by Bahrain's foreign minister, demanded an end to the closure and condemned both Iran and its Houthi allies in Yemen for disrupting shipping and threatening regional security.

"Iran's actions in the Strait of Hormuz continue to threaten international security and navigational rights and freedoms. We call for the full restoration of navigational rights and principles without delay," Bahraini Foreign Minister Abdullatif bin Rashid Al Zayani told the General Assembly, reading the joint statement on behalf of Gulf Arab states and Western powers.

Secretary of State Marco Rubio, asked about the prospects for renewed talks, said Washington remained open to engagement "especially if it has the prospects of leading to something positive." Iranian hardliners have pushed back publicly on any appearance of capitulation; parliament speaker Mohammad Bagher Ghalibaf said this week that "Trump must understand that he cannot impose his power on the Iranian people," reflecting the domestic political constraints facing Iranian negotiators even as they explore a deal.

The State Department has continued to frame its posture around dismantling the revenue streams that fund Iran's regional operations, even as administration officials engage in the New York talks, a dual-track approach that has drawn scrutiny at the Security Council, where members have repeatedly urged both sides to implement rather than merely announce a peace framework.

What happens next

No timetable has been set for the phased arrangement under discussion, and officials involved in the talks describe the obstacles as significant: Iran wants written, verifiable commitments on sanctions relief and access to frozen assets before ceding its main point of leverage, while the United States wants guaranteed free passage before easing economic pressure. President Trump has suggested a fuller agreement may not come together until after the November 3 midterm elections, a timeline Iranian officials have not confirmed.

In the meantime, the maritime industry is bracing for further incidents rather than an imminent reopening. Shipowners' associations and the IMO have continued to advise vessels to avoid the strait where possible, and insurers have kept war-risk premiums for the route at levels reflecting an active conflict zone. Diplomats involved in the New York talks caution that previous understandings, including the one signed by Trump and Pezeshkian in June, collapsed within weeks — a precedent that has left both sides wary of a repeat, even as the economic and human toll of the closure continues to mount.