Vessels recently anchored off the coast of Oman near the Strait of Hormuz. A survey suggests that Persian Gulf oil exports have surpassed pre-war levels.
Under American protection, a temporary shipping system is helping tankers traverse the Strait of Hormuz, allowing oil transportation to continue even amid one of Iran's most intense assault waves.
Data from ship-tracking agency Kpler shows that in the week ending October 18, Middle East oil shipments averaged more than 24 million barrels per day, including oil transported through the Strait of Hormuz and other alternative routes in the region, exceeding the pre-war daily average of 23.3 million barrels.
Preliminary data indicates that during the same period, oil shipments through the Strait of Hormuz, including offshore transfers in the Gulf of Oman, averaged about 14 million barrels per day, equivalent to 82% of pre-war levels.
Oil prices remain elevated. In recent days, Brent crude, the international benchmark, has continued to climb, rising to around $108 per barrel on Tuesday. Traders worry that the improvement in Strait of Hormuz shipping conditions may not be sustainable, especially if hostilities flare up again. Declining global oil inventories also leave the market with little margin for error. Moreover, this transportation system is costly to operate, and those costs are ultimately passed on to consumers at the gas pump.
Nevertheless, the resilience demonstrated by oil transportation still marks a shift in the contest over the world's most important energy chokepoint. Iran retains the ability to make shipping dangerous and expensive, but its capacity to prevent vessel passage has diminished, weakening Tehran's leverage in its standoff with the United States.
Hamad Hussain, senior commodities economist at Capital Economics, said: "From a big-picture perspective, a shipping system that allows vessels to traverse the dangerous Strait of Hormuz with a relatively controllable degree of safety has now been established, and the willingness of parties involved in oil exports to take on risk has also increased."
Pipelines in Saudi Arabia and the United Arab Emirates are also transporting oil via alternative routes. Kpler estimates that in September, about 40% of non-Iranian crude exported from the Persian Gulf bypassed the Strait of Hormuz, compared with only 17% before the war.
This success stands in stark contrast to the predicament facing Iran. Due to the U.S. naval blockade, Iran's own oil exports have been severely constrained. The risk is that Iran may seek to reassert its influence by launching more intense attacks, and could potentially drag the United States into another confrontation before the U.S. midterm elections in two weeks.
Despite escalating attacks around the Strait of Hormuz, oil transportation in the Gulf region continues. According to statistics compiled from reports by the UK Maritime Trade Operations Centre and maritime security firms, about 30 attacks on vessels have occurred this month. Michelle Wiese Bockmann, senior analyst at maritime intelligence firm Windward, said that the number of vessels attacked in October accounted for 20% of the total number of vessels attacked throughout the entire war.
Christopher Long, a former British naval officer now with Neptune P2P Group, said: "Iran is trying to re-establish its blockade of the Strait of Hormuz."
For many oil traders and shipowners, the risk of traversing the Strait of Hormuz is worth taking. Homayoun Falakshahi, head of crude oil analysis at Kpler, estimates that compared with pre-war levels, traders can earn an extra $20 per barrel by reselling Iraqi crude, equivalent to about $40 million in additional revenue for a cargo carried by a very large crude carrier. Just three such voyages would be enough to recoup the cost of purchasing a secondhand tanker worth $100 million.
Seafarers can also receive extra bonuses for undertaking dangerous transit missions. To attract crew members to board vessels heading into the Persian Gulf, employers are offering bonuses of up to two to three times their normal monthly salary. There were earlier reports that companies had offered as much as $25,000 for a round trip that typically takes one to two weeks.
Falakshahi said: "Despite the increasing number of attacks, oil shipment volumes remain high because generous profits make taking these risks worthwhile."
Shipbrokers say that because tanker freight rates in the Persian Gulf region have reached unprecedented levels, some shipowners are redirecting older tankers previously used to transport Venezuelan and Russian oil to the Persian Gulf. Many tankers are conducting short shuttle runs in dangerous waters. On a shipping corridor along the coast of Oman, U.S.-provided air cover can offer a certain degree of protection to vessels.
Tankers load oil inside the Persian Gulf, then exit through the Strait of Hormuz, typically turning off their vessel tracking signals during the voyage. Afterward, these tankers stop near Oman to transfer cargo to other vessels bound for distant markets, then return to the Persian Gulf to load the next batch of oil. Inside the Persian Gulf, they face the highest risk of attack.
Meanwhile, Iran's Islamic Revolutionary Guard Corps is using drones and missiles to prevent vessel passage. The group has also begun adopting guerrilla tactics long used by Yemen's Houthi rebels to attack shipping near the entrance to the Red Sea, including deploying observation posts on small fishing boats and dispatching armed personnel on maritime operations.
Windward's Wiese Bockmann said war risk insurance rates have also climbed from less than 3% of vessel value to as high as 10%. Natasha Kaneva, head of the global commodities strategy team at JPMorgan, said: "In April, the problem was a crude oil shortage, but by October, the problem has become transportation costs."
However, despite Iran's threat that if it cannot export oil, it will not allow its neighbors to export oil either, oil is still flowing out of the Persian Gulf in large quantities. Capital Economics' Hussain said: "If Iran wants to regain the control it once had over oil transportation in the region, it will have to take more aggressive action."
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