# SITREP: 2026-07-05 (Day 128) Lead: IRAN IS WINNING THE HORMUZ ROUTING WAR, ONE SHIP AT A TIME Compiled by a language model from that day's archived articles; analysis, not archive record. Page: https://iranwar.liminallayers.com/bulletins/sitrep-2026-07-05/ Licence: CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/); sources remain their publishers'. ## OVERVIEW The Khamenei funeral is now doing double duty as a political convention and a strategic signalling exercise. Millions are in the streets, Mojtaba Khamenei is still nowhere to be seen, and Iran's parliament speaker is using the sidelines of the mourning ceremonies to publicly restate that the MoU is alive but under strain. Meanwhile, the Hormuz shipping contest has sharpened overnight: IRGC warnings have now visibly redirected vessels away from the US-backed southern route, and Iran's ambassador to Beijing has publicly confirmed that Hormuz fees are coming, with China getting preferential treatment. The funeral pause is holding. The Hormuz contest is not pausing with it. ## Lead story: IRAN IS WINNING THE HORMUZ ROUTING WAR, ONE SHIP AT A TIME This is the story that most people following the funeral coverage are missing, and it is arguably more consequential for the next six months than anything happening at the Grand Mosalla. The US-backed "Omani corridor," the southern shipping route through the Strait of Hormuz that France, the UK, and Washington have been actively promoting as an alternative to Iran's coastal lane, is collapsing in practice. According to maritime AI firm Windward, at least eight vessels attempted the southern route over the past 48 hours and turned back. Two specifically switched onto the Iranian-designated route after receiving IRGC radio warnings. Four more simply retreated into the Persian Gulf [5] [6]. Bloomberg confirmed the reversals with satellite imagery from MarineTraffic [5]. This matters enormously. The entire Western strategy in Hormuz since the ceasefire has rested on the idea that commercial shipping could gradually normalise using the Omani corridor, reducing Iran's practical leverage over the waterway without requiring a direct confrontation. That strategy is now visibly failing. IRGC patrol boats do not need to fire a shot. The radio warning is enough. On Saturday, Iran's ambassador to China made the end-state explicit at the World Peace Forum in Beijing: Hormuz fees are coming [7]. They will not be called tolls, because tolls are illegal under international maritime law. They will be "service fees" covering security, passage supervision, and environmental management. China and "friendly" countries will receive "special considerations" on rates [7]. The architecture being described is essentially the Strait of Malacca model, which the Guardian reports even some European states privately admit will be hard to reject if the fee structure is framed comparably [6]. Sit with the sequencing here. Iran and Oman formalised joint management of the strait last week. Iran's ambassador then publicly announces a fee structure, with preferential rates for Beijing, while Western naval forces are clearing mines and trying to establish an alternative route that ships are now refusing to use. The MoU signed on June 15 required Iran to allow free passage for 60 days. That clock is running. When it expires, the fee regime Iran is describing will not be a violation of anything. It will simply be the new normal. Ghalibaf, speaking on the sidelines of the funeral to Hamas's leadership, was characteristically blunt about the MoU's status: implementation is "difficult but possible," and diplomacy must consolidate what he called the "achievements of resistance forces" [3]. That is not the language of a side that thinks it lost. ## ALSO NOTABLE - **Mojtaba Khamenei's absence from his own father's funeral is now conspicuous enough that it has become a news story in itself.** His three brothers, Mostafa, Meysam, and Masoud, all attended and prayed beside their father's coffin on Sunday [1] [2]. Mojtaba did not. The official explanation is Israeli assassination threat, which is entirely plausible given that Israel's defence minister has publicly stated he is "marked for death." What it reveals operationally is that Iran's new supreme leader is governing from a location and condition that his own government will not confirm, and has not issued a single public statement since March [11]. The funeral week was the obvious choreographed moment to change that. He did not appear. Draw your own conclusions about why. - **Iran is formally pursuing legal complaints against the US and Israel** for the assassination of Ali Khamenei. Government spokeswoman Fatemeh Mohajerani confirmed Sunday that the Presidential Legal Office and Foreign Ministry are "seriously following up" on a case file, collecting evidence and documentation [9]. The legal path here is almost certainly the International Court of Justice. This will go nowhere quickly and both Washington and Tel Aviv know it. But it serves a purpose: it locks in the Iranian narrative that the opening strikes of Operation Epic Fury constituted an assassination, not a military operation, and it creates an institutional record Iran can use in every future negotiation. - **The Houthis launched their most lethal attack on Yemeni government forces in years**, killing 16 troops in the Hodeidah governorate's Jabal Dabbas area using snipers, drones, and mortars [8]. A Yemeni minister put Houthi casualties above 50. Front lines in Yemen have been largely frozen since the 2022 UN truce, which makes this assault notable for its intensity. Separately, the UK Maritime Trade Operations (UKMTO) centre reported a vessel in the Red Sea sending a distress signal after being attacked by unknown armed assailants off Hodeidah [6]. The Houthis are not sitting out the conflict period. The ceasefire covering Iran and the US does not extend to Yemen's internal war, and the combination of an escalating ground offensive and resumed maritime harassment is a reminder that the southern Red Sea has not stabilised. - **Resistance movement leaders met Iran's Foreign Minister Abbas Araghchi in Tehran on the funeral sidelines.** Hezbollah sent a senior delegation led by Mohammad Fneish. Hamas's Leadership Council chair Mohammed Darwish met Ghalibaf [3] [10]. Araghchi told the Hezbollah delegation that Iran is "seriously pursuing" the demand for an end to the war in Lebanon under Article 1 of the MoU, which calls for Israeli withdrawal [10]. Israel has publicly stated it will continue occupying southern Lebanon regardless. These two positions remain flatly incompatible, and every session between Araghchi and resistance faction leaders reinforces Iran's commitment to Article 1 as a non-negotiable. - **Israel has publicly confirmed for the first time that it deployed an Iron Dome battery and IDF troops to the UAE during the war**, with Transportation Minister Miri Regev confirming what had previously only been reported via foreign sources [12]. The detail buried in the confirmation: Iran fired several hundred more ballistic and cruise missiles at the UAE than it did at Israel during the conflict, plus thousands of drones [12]. The UAE absorbed an enormous amount of Iranian firepower, most of it intercepted but some striking military and civilian targets. That is a significant data point about Iran's targeting priorities and operational capacity that has received relatively little attention in Western coverage. ## MARKETS & MONEY Oil is essentially flat at $72, and the market is not reacting to the Hormuz routing story yet. That is either composure or denial. Gold climbed again to $4,187, up from $4,096 a week ago, and the Gold/Oil ratio at 60.88 remains at its conflict-period high. The two assets continue to price different realities: crude is assuming Hormuz muddles through, gold is pricing something unresolved. BAE Systems held near its recent highs, Rheinmetall slipped marginally but remains up roughly 15% over the past month. European equities (DAX, FTSE) are quietly at multi-month peaks. The VIX at 15.81 reflects US market calm that does not match the operational picture in the strait. If the Omani corridor routing failure starts showing up in shipping data as a sustained trend rather than a 48-hour blip, expect energy prices to respond faster than equities. ## WESTERN IMPACTS The Hormuz routing story has a direct pump-price implication that has not landed yet. Oil below $72 has brought fuel costs down meaningfully from the $125 Brent peak earlier in the conflict. But that relief is contingent on the Omani corridor remaining viable as an alternative to Iranian-controlled routes. It is not currently viable in practice [5] [6]. France and the UK committed to a mine-clearing naval operation for the southern route, which Iran's Foreign Ministry has already rejected as "unwarranted interference" [6]. If that operation proceeds, it is a direct confrontation with Iran over strait governance. If it does not, the Western alternative route strategy quietly fails and the fee regime Iran is building becomes the only game in town. Either way, consumers in Europe and elsewhere who have been enjoying falling fuel prices are exposed to a reversal that could arrive without much warning. ## WHAT TO WATCH 1. **The Tehran funeral procession on Monday, July 7.** Iran's government is billing this as a multi-million-person march through the capital before the body moves to Qom. It is the largest set-piece event of the funeral week and the highest-risk moment for an Israeli miscalculation. Watch for any Israeli military readiness announcements or statements from Netanyahu's office in the next 24 hours. Watch also for whether Mojtaba Khamenei appears. If he does not show for the largest procession of the week, his continued absence starts looking less like a security precaution and more like a governance problem. 2. **The Hormuz routing contest in real time.** Windward and MarineTraffic data are now the most useful live intelligence feed available. Watch whether the trend of vessels abandoning the Omani corridor continues over the next 48 hours, and whether any shipping company publicly announces it is using the Iranian route under protest or under commercial pressure. If carriers start formally declaring they have no viable alternative to the Iranian lane, the Western mine-clearing operation moves from a diplomatic option to a political necessity with a deadline. 3. **Post-funeral talk resumption signals.** Burial in Mashhad is scheduled for July 9. Ghalibaf's language on the sidelines, "difficult but possible," is the most calibrated Iranian statement on MoU implementation in days [3]. Watch for any Iranian or US statement between now and July 10 about when and where talks resume. A quick resumption signal would suggest both sides want to maintain momentum. Silence after the burial would suggest the hardening underway inside Iran's political establishment during the funeral week has translated into a tougher negotiating posture. ## References 1. [AJE] Al Jazeera: Sons of Iran’s leader Ali Khamenei attend funeral, but Mojtaba is absent 2. [BBC] BBC News: Iran's supreme leader absent as senior officials attend ayatollah's funeral 3. [AAM] Anadolu Agency — Middle East: Iranian parliament speaker says implementing memorandum ‘difficult but possible’ 4. [TOI] The Times of Israel: In first, government vows to disobey High Court ruling, setting up constitutional crisis 5. [MHR] Mehr News Agency: Ships use Iran-desingated route in Hormuz Strait 6. [GDN] The Guardian — Middle East: Iran seeks to tighten control over strait of Hormuz alongside Khamenei funeral 7. [CRD] The Cradle: Iran to grant China, 'friendly' countries 'special consideration' on Hormuz fees 8. [AJE] Al Jazeera: Houthi rebels kill 16 Yemeni government troops in fiercest clashes in years 9. [JPM] The Jerusalem Post — Middle East: Iran to pursue legal action against Israel, US over Khamenei assassination, official says - report 10. [CRD] The Cradle: Regional resistance factions meet with Iran FM on sidelines of Khamenei’s funeral 11. [GDN] The Guardian — Middle East: Calls for killing of Trump at funeral of Iran supreme leader Ali Khamenei 12. [JPO] The Jerusalem Post: Israel sent Iron Dome system, team to UAE during recent Iran war, Miri Regev confirms 13. [BBC] BBC News: How Iran's new regime is very different to what came before