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The Leverage Moves: Gulf Oil Is Back, but the Chokepoint Has Shifted

October 8, 20267 min readHormuz Strait Monitor
The Leverage Moves: Gulf Oil Is Back, but the Chokepoint Has Shifted

Two sets of headlines this week appear to contradict each other. On one side, Kpler reports that crude and condensate leaving the Gulf averaged 16.5 million barrels per day in September, matching the pre-war average once Iran is excluded. On the other, tankers keep being struck in the Strait, the UK Maritime Trade Operations centre rates the risk "severe," and on October 6 the Panama-flagged tanker On Peace was hit off Oman's Musandam coast with 12 of its 19 crew injured.

The two pictures fit together, but only once you ask which oil, by which route, and counted by whom. This post works through those three questions, and then looks at where the pressure has gone instead.

One recovery, several numbers

The headline figure comes from Kpler, as reported by Euronews: at least 16.5 million barrels per day of crude and condensate left the Gulf between September 1 and 28, matching the pre-war average excluding Iran and about 10.5 million above March's monthly average. The Maritime Executive adds that JPMorgan assesses Gulf export volumes at 98 percent of pre-war levels.

Other measures are lower. Reuters, using Kpler data, put Gulf oil flows excluding Iran at roughly 81 percent of pre-war levels in September. Al Jazeera, also citing Kpler, reported Middle East crude exports of about 16.3 million barrels per day, just under 80 percent of the pre-war level and roughly 3.2 million below February. A market-commentary summary of the Reuters report notes that TankerTrackers and others have argued the Kpler data runs high, which we could not confirm independently.

Most of the gap appears to come from definitions rather than disagreement about the ships. Whether Iran is counted matters a great deal, because the US blockade still holds much of its crude off the market. Whether the measure covers crude alone or also refined products matters as well, and the products have not come back. The Maritime Executive reports that LNG, urea, ammonia, sulfur and refined products are not moving through the strait at pre-war levels, and that US retail diesel hit a record $6.53 a gallon last week, against $3.70 a year earlier.

So the careful reading is that crude volumes excluding Iran have largely recovered, depending on whose count you use, while the broader flow of energy and fuel products has not. Brent traded around $102 on October 5, against roughly $72 before the war, according to Euronews.

Same oil, different doors

The more telling number is how that oil leaves. Kpler says 40 percent of Gulf crude exports now bypass the Strait of Hormuz, up from 17 percent before the war. Put the other way, the share passing through Hormuz has fallen from about 83 percent to about 60 percent, and Al Jazeera's figure of roughly 9.7 million barrels per day through the strait itself is broadly consistent with that, by our own arithmetic. Al Jazeera's article does not say whether its pre-war comparison of about 20 million barrels per day includes products and Iranian cargoes.

The bypass routes are two. Saudi Arabia's East-West pipeline carries crude about 1,200 kilometres to Yanbu on the Red Sea, and the UAE's pipeline runs from Abu Dhabi's fields to Fujairah on the Gulf of Oman. Saudi Energy Minister Prince Abdulaziz bin Salman said on October 6 that the East-West line was back to about 5.8 million barrels per day, against a capacity of up to 7 million, according to The National.

Hormuz itself has become a shuttle. Fox News, citing the administration's framing, described a "Hormuz Shuttle" of more than 116 vessels, mostly operated by UAE, Saudi and Kuwaiti companies, routed along the Omani coast. Kpler says more than 70 percent of the oil crossing the strait ends in a ship-to-ship transfer at the far end. The cost is substantial. BiGGo Finance, summarising Wall Street Journal reporting, puts a round trip at $30 to 40 million, with crews paid up to $25,000 per voyage, and VLCC charter rates briefly exceeded $1.2 million per day at the end of September. Iraqi exporters, according to Bloomberg via The Maritime Executive, are selling crude at up to $37 a barrel below benchmark to absorb those costs.

Two readings of the same data

The Western reading, in this week's coverage, is that Iran is losing its leverage. Treasury Secretary Scott Bessent has said Iran has not loaded a crude cargo since August 25 and that Washington wants Iranian exports at zero, and he has predicted an Iranian economic collapse within weeks. Al Jazeera cites Iranian GDP down 10.1 percent year on year for March to June, the oil and gas sector down 26.4 percent, 12-month average inflation near 70 percent and a rial weaker than 2.2 million to the dollar. President Trump has gone further, claiming inflation near 300 percent and that Iran's oil minister resigned, neither of which we could verify, and the first of which does not match the Al Jazeera figure.

The Iranian reading is less about barrels than about cost and risk. Parliament Speaker Mohammad Bagher Ghalibaf said on October 4 that the strait will not reopen until Iran's seven conditions based on the Islamabad memorandum are met, and Foreign Minister Abbas Araghchi said Tehran has explained those conditions clearly. Security Council secretary Mohsen Rezaei called Bessent's forecasts "delusional." The Revolutionary Guard has reportedly ordered at least one tanker to turn back or face targeting, and BiGGo reports that UKMTO has logged at least one attack a day in the strait or the Gulf of Aden since October 2. If the measure is the price of moving a barrel rather than the number of barrels moved, the shuttle is a system that works only by absorbing attacks.

Both readings can hold. Volumes can recover while the cost of recovery climbs, and the cost can climb without stopping the volumes. Which one prevails depends on how long shipowners, crews and insurers are willing to keep paying.

Where the pressure goes

If Hormuz is no longer the only door, the other doors become the target. The East-West pipeline shut on September 11 after strikes launched from Iraq and resumed on September 22, per Kpler. On October 5, an unnamed Saudi energy-sector source told AFP that a new attack had damaged a pumping station at Khurais and halted flow again, and the Houthis claimed missile and drone strikes on Aramco facilities in the Riyadh and Khurais areas. Saudi authorities and Aramco did not immediately comment, and Bloomberg reported, citing people it did not name, that the pipeline was flowing as normal. The energy minister's 5.8 million barrels figure the next day suggests flow had resumed or never fully stopped, but it does not settle which.

The Red Sea fighting is moving quickly around it. A Saudi-led coalition has launched what Gulf News reports as "Operation Dawn of Yemen," claiming more than 100 fighter jets and 324 targets destroyed, and Saudi Arabia, Pakistan and Turkey activated the Mecca defence pact on October 5. CBS reports the coalition claims control of the Bab el-Mandeb Strait, which the Houthis deny, while the Houthis say they have encircled Taiz and have struck King Khalid International Airport and an Aramco refinery. Aramco's chief executive warned that global stockpiles are "scarily thin."

This is not a new pattern. Iran's strike on the UAE's Fujairah Oil Industry Zone on May 5 was the first attack on a Hormuz bypass route, and the bypasses have now become targets in their own right, with different attackers than the ones who closed the strait.

What to watch

Four things will show whether the recovery holds. The first is whether the East-West pipeline sustains its 5.8 million barrels per day, since a month with two outages looks very different from one with none. The second is Kpler's October figures and which definition the market settles on. The third is shuttle attrition, meaning crew availability, insurance and the daily count of ships struck. The fourth is refined products, where diesel prices say the recovery has not reached consumers.

The stronger claim, that Iran has lost its leverage over Hormuz, is not supported by this week's evidence. The weaker one, that leverage over the strait is being replaced by exposure elsewhere in the system, is. The oil has found other doors, and so has the risk.

Sources

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