As Iran and the United States work with mediators to end seven months of hostilities, the reality in the Strait of Hormuz is shifting in ways that could prove to be a game-changer in ongoing negotiations.
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that → work → negotiations
According to the latest data from tanker-tracker websites, traffic through the key waterway has been steadily increasing, with some estimates putting oil and petroleum flow through the Strait of Hormuz at nearly 80 percent of what it was before the US-Israeli war on Iran began on February 28.
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war → accord → February
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Araghchi → shift → war
has Trump rejected Iran’s peace proposal?
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Trump → reject → proposal
This could dent Iran’s leverage in reaching a favourable deal for itself in its attempts to end the fighting, which has seriously hampered its already heavily sanctioned economy, amid the US blockade of Iranian ships and ports.
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which → dent → ships
Despite that, experts believe it would be a mistake to think normality in the Strait of Hormuz is imminent, or that Iran will fold easily despite growing economic hardship.
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Iran → believe → hardship
“The fact that oil is getting through the Strait of Hormuz is encouraging, but flows are not yet regarded as completely secure or guaranteed, particularly while the wider conflict remains unresolved,” Susannah Streeter, chief investment strategist at Wealth Club, told Al Jazeera.
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Streeter → get → Jazeera
Moreover, oil prices remain high globally, including in the US, where President Donald Trump faces a crucial midterm election that could see his party swept away in both houses of Congress.
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party → remain → Congress
Tanker insurance costs also remain elevated and energy flows through Hormuz are still far from secure, suggesting Iran’s leverage may be weakening rather than disappearing.
Oil flows through Hormuz recovering
The latest data from commodity analytics firm Kpler points to a significant recovery in oil exports from the Middle East.
Crude exports reached an estimated 16.328 million barrels per day (bpd) in September – their highest level since the war began in late February, the firm reported this week.
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firm → remain → February
Flows through the Strait of Hormuz itself were expected to reach about 9.719 million bpd during the month.
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Flows → expect → month
Saudi Arabia has driven much of the increase, with its exports rebounding from 2.446 million bpd in August to about 5.4 million bpd in September.
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exports → drive → September
Kpler said Middle East crude exports have recovered to just under 80 percent of their pre-war level.
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exports → say → level
But the figures remain about 3.2 million bpd below the 19.513 million bpd exported in February.
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figures → remain → February
The data also does not include ships crossing Hormuz with their tracking systems switched off, meaning actual traffic could be higher.
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traffic → include → Hormuz
Prior to the war, an estimated 120-140 vessels crossed through the waterway daily, roughly half of them oil tankers moving approximately 20 million barrels per day.
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vessels → estimate → day
At the height of the fighting, traffic through the waterway collapsed to as few as two tankers a day after Iran in effect closed the strait in retaliation for US-Israeli attacks.
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Iran → collapse → attacks
Is Iran losing leverage?
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Iran → lose → leverage
The rebound in oil flow presents a challenge for Tehran.
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rebound → present → Tehran
Iran has sought to use its ability to disrupt the Strait of Hormuz – one of the world’s most important energy chokepoints – as leverage against Washington’s military and economic pressure.
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Iran → seek → pressure
But if large volumes of oil can continue moving through the strait while Iran itself remains under a US naval blockade, Tehran’s bargaining power could diminish.
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power → continue → blockade
Iran, however, rejects any assessment that its control over the strait is slipping.
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control → reject → strait
Hossein Mohebbi, the Islamic Revolutionary Guard Corps spokesperson on Wednesday said there is an ongoing “military conflict” in the Hormuz Strait.
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Mohebbi → say → Strait
“We have been hitting small ships and preventing them from passing for a long time, but America does not respond,” Mohebbi said in an interview with the semi-official Fars news agency.
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Mohebbi → hit → agency
Separately on Wednesday, the United Kingdom Maritime Trade Operations (UKMTO) centre said unknown projectiles struck three ships in the waterway on Tuesday, including a crude oil tanker.
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projectiles → say → tanker
Oil prices are another indication that Iran has not lost all of its leverage.
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Iran → lose → leverage
Brent crude fell 2.6 percent to $102.59 a barrel on Tuesday as traders focused on recovering Middle East exports.
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traders → fall → exports
But it was still heading for a roughly 13 percent gain in September.
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it → head → September
Chris Beauchamp, an analyst at IG, said markets were beginning to incorporate evidence of recovering flows but remained wary about how durable that recovery would be.
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recovery → say → flows
“It takes time for evidence to filter through to markets,” Beauchamp said.
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Beauchamp → take → markets
“Oil prices came off yesterday as the narrative began to take hold, and should continue to fall.”
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narrative → come → hold
But he said concerns persisted over whether the US protection system could withstand a renewed barrage of Iranian missiles and drones.
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system → say → missiles
Streeter of Wealth Club said the market still had a geopolitical risk premium built into crude prices, despite the improving flows.
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market → say → flows
“Insurance costs for tankers also remain elevated because of the perceived risks of operating in the region, adding to the cost of transporting crude even as more ships make it through the waterway,” she said.
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she → remain → waterway
Moreover, Streeter warned that crude figures tell only part of the story.
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figures → warn → story
Flows of refined fuels, particularly diesel and gasoline, remain constrained, while damage to infrastructure has placed additional pressure on energy supply chains, she added.
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she → remain → chains
There is another vulnerability, the investment strategist pointed out.
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strategist → be → ?
Countries including the US have relied heavily on strategic oil reserves to cushion the impact of the disruption and help contain prices.
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Countries → include → prices
“With those stockpiles now significantly depleted, there is a thinner buffer if there is another disruption, which is helping to keep a floor under crude prices,” Streeter added.
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Streeter → deplete → prices
‘Economic war’ on Iran
There is little doubt that economic pressure on Iran is intensifying, potentially increasing Tehran’s incentive to reach an agreement.
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pressure → be → agreement
Official data from the Statistical Center of Iran earlier this month showed gross domestic product (GDP) contracting 10.1 percent year on year between March 21 and June 20, while the crucial oil and gas sector shrank 26.4 percent.
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sector → show → March
…and 24 more, not listed.
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