Gulf oil flows recover as Iran loses leverage over Strait of Hormuz

Crude oil exports from the Persian Gulf have recovered to levels comparable to those seen before the recent conflict, yet the composition of these shipments has undergone a fundamental transformation. While the volume of oil leaving the region has returned to prewar averages, the routes and shipping arrangements facilitating this trade are markedly different from the historical norm. This shift suggests that Iran is experiencing a significant reduction in its strategic leverage over the Strait of Hormuz, a critical chokepoint for global energy supplies. The recovery in physical flows, however, has not translated into a normalisation of market conditions, as persistent risks continue to underpin elevated energy prices and logistical complexities.

According to data from commodity analytics firm Kpler, at least 16.5 million barrels per day of crude oil left the region between September 1 and 28. This figure matches the prewar average when Iranian exports are excluded from the calculation. Despite this recovery in crude volumes, a bottleneck in refinery capacity has continued to drive a global spike in diesel prices. Figures published by the European Union on October 1 indicated that diesel pump prices remained at record levels. Similarly, prices in the United States have surged, demonstrating that the recovery in oil exports has not yet alleviated downstream pressure on fuel costs.

The most significant change lies in the routing of these shipments. Prior to the conflict, 83 per cent of the region’s crude oil crossed the Strait of Hormuz. In September, however, 40 per cent of the oil bypassed the strait entirely, moving instead through pipelines and alternative routes via Saudi Arabia and the United Arab Emirates. Approximately 60 per cent of the total volume, equivalent to 9.9 million barrels per day, physically crossed the strait. Kpler noted that more than 70 per cent of the crude that did cross the strait in August, the most recent month for which data is available, changed tankers offshore in the Gulf of Oman. This practice highlights the extent to which current shipping operations have deviated from standard commercial norms.

Analysts suggest that this recovery indicates a degradation of Iran’s ability to disrupt the waterway. Mohammad Ghaedi, a lecturer at George Washington University, stated that the current level of traffic was already considered unacceptable by authorities in Tehran. However, experts caution that this does not imply Iran has lost control of the strait, as Tehran never formally controlled the passage. Instead, its leverage has historically rested on its capacity to make the route dangerous, compelling shipping companies to weigh the risks and costs of entering the Gulf. This ability appears to have weakened as United States forces provide protection for commercial shipping and companies develop methods to move oil while limiting their exposure to the strait.

Ellen R. Wald, an author and energy markets analyst, observed that Iran’s ability and willingness to attack ships in the Gulf is declining, allowing vessels to transit under United States military cover. Nevertheless, she warned that the recovery in flows should not be mistaken for a return to normalcy. Some shipping companies are accepting significant risks to ferry oil through the strait to larger tankers waiting outside the Gulf, while others are operating without insurance or under unusually difficult conditions. These significant risks and high costs explain why oil prices have not dropped substantially despite the increase in flows.

The continued threat to vessels, elevated insurance costs, and dependence on United States military protection mean that a war premium remains embedded in the price of oil. Kpler figures indicate that the region’s export system has effectively been rebuilt around the disruption, with pipelines, Red Sea routes, and offshore ship-to-ship transfers helping producers circumvent the chokepoint. While the more oil that moves without being stopped, the weaker Tehran’s ability to use Hormuz as a coercive tool becomes, the extraordinary measures required to keep that oil moving demonstrate that the strait remains a source of leverage. For now, the evidence points to a gradual erosion rather than a complete disappearance of Iranian leverage, leaving Hormuz as a vulnerability for Washington even if Iran can no longer exercise the same degree of pressure as at the height of the war.