Traffic through the Strait of Hormuz has almost stopped, raising pressure on oil markets, shipping routes and energy security worldwide.
Oil traffic through the Strait of Hormuz has almost stopped
Traffic through the Strait of Hormuz has become almost impossible. In recent days, six tankers carrying Iranian crude were forced to return to Iran because of the US blockade. Vessel-tracking data show the impact the war in Iran is having on traffic along one of the world’s most important oil export routes.
Two weeks ago, Trump imposed a naval blockade on vessels linked to Iran. Tehran responded by deploying its “mosquito fleet”, small armed patrol boats used to obstruct passage. Both the US and Iran are trying to control Hormuz, and the result is near-zero traffic, fluctuating oil prices and stalled talks to end the war.
Before the conflict in the Middle East began, between 125 and 140 ships crossed the strait every day. According to Kpler tracking data and SynMax satellite analysis reported by Reuters and updated to April 27, only seven vessels managed to pass through in one day, and none was carrying oil bound for the global market. The six tankers forced back to Iranian ports in recent days were carrying around 10.5 million barrels of oil, according to estimates based on TankerTrackers.com satellite data.
The standoff over the Strait of Hormuz increases uncertainty
The US naval blockade is extending the time needed to find a solution to the crisis, while Iran has doubled down on efforts to obstruct the passage. Hundreds of ships and almost 20,000 seafarers remain trapped inside the Gulf.
“What the United States is doing seems to have extended the risk area for ships,” Rajalingam Subramaniam, chief executive of Fleet Management Limited, which has more than 400 seafarers trapped in the Persian Gulf, told Bloomberg. “This show of force has effectively created more uncertainty,” he added.
Persian Gulf crude production is down 57%
Crude production in Persian Gulf countries is already 57% below pre-war levels, according to Goldman Sachs analysts, including Daan Struyven, cited by Bloomberg. Returning to previous levels could take months, even if the Strait of Hormuz fully reopens and no further attacks take place.
Demand destruction is already emerging in gas markets, while the shortage of fertilisers will have a severe impact on food production and prices for the rest of the year, and possibly beyond. For import-dependent African economies, including parts of Sub-Saharan Africa, prolonged disruption in fuel and fertiliser markets could add further pressure to already fragile energy and food systems.
A new normal for oil prices?
One possibility is that today’s high oil prices could become the new standard. Suvro Sarkar of DBS Bank told Reuters that the situation could move from de-escalation into a form of “prolonged ceasefire limbo”, with oil prices ranging between USD 100 and USD 125 a barrel.
“Without an immediate agreement and with an indefinitely extended ceasefire that provides no certainty over the opening of the strait, oil prices will tend to move higher as physical markets align with paper markets. Eventually, the war will almost be normalised by financial markets. This will cause lower volatility but a higher starting point for prices.”
