Iran partially closed the strategically vital Strait of Hormuz on Tuesday, state media reported, citing "security precautions" as Tehran's Revolutionary Guard conducts military drills in the waterway.
It comes as the U.S. and Iran hold talks in the Swiss city of Geneva, seeking to resolve an ongoing dispute over Tehran's nuclear program.
It marks the first time Iran has shut parts of the Strait of Hormuz, a major international waterway that links crude producers in the Middle East with key markets across the globe, since U.S. President Donald Trump threatened Tehran with military action in January.
Located in the gulf between Oman and Iran, the strait is recognized as one of the world's most important oil choke points.
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 Guard's "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 and Lee Ying Shan contributed to this report.
