Strait of Hormuz tanker traffic slows 31% as US-Iran clashes escalate

Gulf energy flows face an uncertain recovery as renewed US-Iran hostilities cut Strait of Hormuz tanker traffic by nearly a third this week, reversing a fragile recovery and pushing oil prices toward weekly gains of 4% to 5%.

Renewed US-Iran hostilities cut daily tanker traffic through the Strait of Hormuz by 31% this week to 22 crossings, reversing a fragile recovery and pushing oil prices toward weekly gains of 4% to 5%.

"Iran will not have the ability to close the Strait of Hormuz going forward," US Energy Secretary Chris Wright said at a conference in New York on June 24, though this week's attacks show Tehran retains significant leverage over the waterway.

Daily vessel transits fell to 22 on July 9 from 30 a day earlier, according to maritime data firm Kpler, after Iran attacked three Qatari and Saudi tankers and the US struck about 90 Iranian military targets. The International Energy Agency said global oil supply rose 4.1 million barrels a day in June after the strait reopened but remained 9.4 million bpd below prewar levels. WTI crude traded around $71 a barrel Friday, while Brent hovered just under $76 — well below wartime highs of about $122.

The escalation threatens to undo the interim truce that had allowed 5 million to 8 million bpd to exit the strait via US military escorts, still far below the prewar average of 20 million bpd. If Washington reimposes its naval blockade, an additional 1.5 million bpd of Iranian exports could come off the market, analysts say, while marine insurers have shortened war risk premium windows to just six hours before transit.

The fighting this week represents the most significant escalation since the war's opening phase in late February, analysts at maritime intelligence firm Windward said. Iran's Revolutionary Guard warned Thursday that US military interference in determining shipping routes "will not only be met with our decisive response, but will also seriously disrupt the gradual reopening process."

Southern Corridor Becomes Flashpoint

At the heart of the dispute is a US-protected shipping lane along Oman's coast that allows tankers to bypass Iran's territorial waters. Under the interim deal reached in June, the US lifted its naval blockade of Iranian ports and Iran agreed to ensure safe passage. But Tehran insists ships are entitled to safe transit only if they use a northern route through Iranian waters — a condition Washington rejects.

"The underlying problem here is that the memorandum of understanding did not reach an understanding with respect to the management of ship traffic through the strait," said David Goldwyn, who served as the State Department's special envoy for international energy affairs under President Barack Obama. "It essentially punted that issue."

The US has reinstated oil sanctions on Iran, and President Donald Trump declared the truce "over," though a US official later said technical talks continue. Qatar has sent negotiators to Tehran in coordination with Washington to de-escalate tensions, according to a diplomat familiar with the visit.

Supply Recovery at Risk

The IEA said global oil demand is beginning to recover after hitting its lowest point in May, aided by seasonal consumption and the gradual return of Middle East supplies. Worldwide oil stocks rose by 21 million barrels in June, the first increase in four months. But the agency warned that any renewed escalation could derail its forecast of a significant market surplus in 2027.

Iran's efforts to control the strait are likely untenable over the long term, said James Kraska, an expert on international maritime law at the US Naval War College, because it would set a dangerous precedent for other trade choke points. China and Russia have an interest in ensuring the precedent is not repeated in the Strait of Malacca or the Danish Straits, he said.

For now, Gulf producers face a slow and uncertain recovery as they work to clear ships, bring in tankers, restart halted output and repair damage to refineries, LNG facilities and ports, said Clara Gillespie, a senior fellow at the Council on Foreign Relations. The last time the strait faced a comparable disruption — during the Iran-Iraq War in the 1980s — it took months for shipping patterns to normalize after hostilities ceased.

This article is for informational purposes only and does not constitute investment advice.