Hormuz Oil Flows Recover to 98% of Pre-War Levels, but Strategic Risks Persist

Key points

• Crude flows through the Strait of Hormuz averaged 13.1 million barrels per day, reaching approximately 77-80% of pre-war levels, according to Kpler.
• Total Middle Eastern crude exports, including diversions, have recovered to 98% of pre-war levels, per JPMorgan estimates.
• Saudi Arabia diverted 7 million barrels per day via the East-West pipeline to the Red Sea, though flows through Bab el-Mandeb have declined by more than half due to Houthi control.
• Refined product flows remain at just 58% of pre-war levels, contributing to record diesel prices above $6 per gallon in the US.
• Global oil inventories have tumbled by approximately 2 billion barrels during the conflict, creating a risk of a future supply crunch.

Background

Since the conflict began, the US has utilized covert 'dark' transits and naval escorts to maintain oil flow through the Strait of Hormuz. Previous reports indicated flows had recovered to two-thirds of pre-war levels by August, but recent data shows a further surge. The situation is complicated by ongoing attacks on tankers and the diversion of Saudi oil to the Red Sea, which has faced its own disruptions from Houthi strikes on the East-West pipeline.

How outlets are covering it

While pro-Trump figures like Richard Goldberg and KT McFarland celebrate the blockade's success, arguing Iran's leverage is dead, Michael Rubin of the Middle East Forum argues the recovery is misleading. Rubin contends that Saudi Arabia is effectively paying off Houthi and Iranian interests to keep oil flowing, rather than the blockade being effective. CNN's David Goldman notes that while Iran is losing influence, the status quo is unsustainable due to shrinking inventories and high insurance costs. OilPrice.com highlights that while crude flows have recovered, the refinery bottleneck persists, keeping diesel prices at record highs.

Why it matters

The recovery in crude flows has prevented oil prices from reaching record highs, but the underlying fragility of the supply chain remains. With global inventories depleted and refined product flows constrained, any further disruption could lead to a sharp spike in energy prices. The situation also highlights the complex dynamics of Saudi Arabia's strategy, which may involve appeasing adversaries to maintain economic stability, potentially undermining long-term security goals.

What to watch

Analysts are watching for signs of a tipping point in global oil inventories. If stockpiles become insufficient to meet demand, oil prices could rocket higher. Additionally, the sustainability of the current shipping routes and the potential for further Houthi or Iranian attacks on infrastructure will be critical factors in determining the stability of global energy markets.