Strait of Hormuz traffic collapses to single digits as Saudi Arabia, Oman seek passage deal

Daily vessel traffic through the Strait of Hormuz fell to single digits last week, signaling a de facto blockade that threatens to upend global crude flows.

Saudi Foreign Minister Prince Faisal bin Farhan and Omani counterpart Badr al-Busaidi discussed regional security and freedom of navigation in the Strait of Hormuz on July 27, as Kepler data showed daily vessel traffic through the chokepoint fell to single digits between July 24 and 26 — a collapse that signals a de facto blockade despite a reported halt in mutual attacks between the US and Iran.

"The Strait of Hormuz is the world's most critical energy artery, and single-digit daily transits effectively mean it's closed for business," said Omar Tariq, an energy analyst covering global oil markets. "Even a temporary disruption at this scale would force a dramatic repricing of crude."

Brent crude has already topped $100 a barrel for the first time since May, according to market data, as the Hormuz crisis compounds threats from Yemen's Iran-backed Houthis, who this week declared a "maritime embargo" on Saudi-linked vessels transiting the Bab el-Mandeb Strait. The Bab el-Mandeb carries 12 percent of global trade and 7 percent of oil supplies. Prediction markets now price a 6.2 percent probability of crude reaching a new all-time high by Sept. 30 and a 13.5 percent probability by Dec. 31, reflecting expectations of extended geopolitical tensions.

The simultaneous pressure on two strategic chokepoints — Hormuz and Bab el-Mandeb — threatens to add more than $20 billion annually to oil import bills for vulnerable developing economies, according to the United Nations Conference on Trade and Development. For East African nations such as Kenya, Uganda and Rwanda, which import nearly all their petroleum products, the effects extend beyond fuel prices to food, fertilizer and electricity generation costs. Kenya has already halved VAT on fuel to cushion consumers and recently extended the measure by three months.

India's Mangalore Refinery and Petrochemicals Ltd. issued a first-of-its-kind tender instructing crude suppliers to avoid both the Red Sea and the Strait of Hormuz, underscoring how shippers are rerouting supply chains. At least three oil tankers — the Singapore-flagged Xin Long Yang, Liberia-flagged Rodos and Hong Kong-flagged New Prime — reversed course near Bab el-Mandeb in recent days, according to Automatic Identification System data, though no attacks were reported.

A Two-Front Supply Crisis

The Houthi blockade of Saudi-linked vessels marks a significant escalation. The group had largely refrained from targeting US vessels in the Bab el-Mandeb since late 2023, when it began launching dozens of missile and drone attacks on ships linked to Israel, forcing major shipping companies to suspend Red Sea transits. Now, with both Hormuz and Bab el-Mandeb under pressure, the cost of rerouting is mounting. If vessels avoid the Red Sea, shipping companies would need to sail around South Africa's Cape of Good Hope, adding almost a month to voyages and raising freight charges, insurance premiums and bunker fuel costs, said John Kariuki, a Mombasa-based petroleum dealer.

The Port of Mombasa, East Africa's busiest gateway, relies on Bab el-Mandeb traffic to connect with Europe, the Mediterranean and the Middle East. Kenya Ports Authority Managing Director Capt. William Ruto said Mombasa and Lamu ports were ready to accommodate rerouted vessels, though higher port activity could be offset by rising costs for importers reliant on Middle Eastern markets.

Saudi Arabia condemned the Houthi blockade as a breach of international law and maritime piracy and pledged to strengthen protection for commercial vessels using the Bab el-Mandeb. Whether those measures will prevent further attacks remains unclear. The diplomatic channel between Riyadh and Muscat — Oman has historically served as a mediator between Gulf states and Iran — suggests both sides are seeking a negotiated solution before the supply crisis deepens further. If traffic through Hormuz remains at single digits for another week, Brent crude could test its all-time high above $147 a barrel, set in July 2008.

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