On Tuesday, Iran announced a partial closure of the crucial Strait of Hormuz, citing “security precautions” as the Revolutionary Guards initiated military exercises in the area, according to state media reports.

This development coincides with ongoing discussions between the U.S. and Iran in Geneva, Switzerland, aimed at addressing the persistent impasse over Iran’s nuclear ambitions.

This is the first instance of Iran partially closing the Strait of Hormuz—a pivotal maritime passage connecting Middle Eastern oil producers with global markets—since U.S. President Donald Trump issued a military threat to Tehran in January.

The strait, situated between Oman and Iran, is widely regarded as one of the most critical oil transit routes worldwide.

About 13 million barrels per day of crude oil transited the Strait of Hormuz in 2025, accounting for roughly 31% of global seaborne crude flows, data provided by market intelligence firm Kpler showed.

Tuesday’s temporary closure of the waterway was aimed at ensuring shipping safety as part of the Revolutionary Guards’ “Smart Control of the Strait of Hormuz” drill. The exercise is designed to improve Iran’s operational readiness and bolster its deterrence, among other objectives.

Iran and the U.S. reached an understanding of the “guiding principles” during the talks, Iranian Foreign Minister Abbas Araghchi told reporters after they concluded, Reuters reported.

The progress does not mean an agreement will be reached soon and more work still needs to be done, he added.

Energy market participants had been closely watching the outcome of the U.S.-Iran talks, particularly as both sides have increased their military presence in the region.

Oil prices were last seen trading lower, erasing earlier gains. International benchmark Brent crude futures with April delivery fell 1.8% to $67.48 a barrel, while U.S. West Texas Intermediate futures with March delivery stood 0.4% lower at $62.65

Jakob Larsen, chief safety and security officer at BIMCO, which represents global shipowners, said the temporary closure of the Strait of Hormuz was likely to cause “minor nuisance and delays” to inbound shipping headed for the Persian Gulf — but no major disruptions.

“The exercise establishes a live firing exercise area overlapping the inbound part of Strait of Hormuz’s Traffic Separation Scheme, and requests that shipping keeps clear of the area for the duration of a few hours,” Larsen said.

“Given the level of tension in the area, it is expected that commercial shipping will comply with the Iranian request to keep clear of the exercise area,” he added.

— CNBC’s Lori Ann LaRocco & Lee Ying Shan contributed to this report.