FRANKFURT, Germany — When Iran blockaded the Strait of Hormuz at the onset of the conflict, cutting off maritime transit for approximately 15 million barrels of oil daily, global markets feared a catastrophic price surge that could devastate the world economy.
Instead, nearly seven months into the conflict, oil prices remain elevated but manageable, with supply sufficiently meeting global demand. While high prices pose political challenges for U.S. President Donald Trump and other leaders, the feared economic collapse has not materialized.
This resilience stems from Saudi Arabia and other regional producers rapidly activating alternative transit routes and tapping into spare pipeline capacity. However, when Iran and its allies targeted these alternatives, Gulf exporters and the U.S. military were forced to devise further workarounds in a relentless, often covert game of whack-a-mole.
With oil trading around $100 per barrel—higher than pre-war levels but far below worst-case projections—Iran’s geopolitical leverage has diminished. Meanwhile, a stringent U.S. naval blockade and tightened sanctions have severely choked the Iranian economy.
However, these makeshift solutions come at a high cost and may prove unsustainable in the long run. While the depletion of commercial stockpiles, particularly by China, has temporarily stabilized prices, this buffer cannot last forever. Furthermore, Iran retains the capability to disrupt the delicate balance through continued attacks on critical infrastructure.
Iran initiated attacks on vessels in the Strait of Hormuz in retaliation for the U.S.-Israeli bombing campaign that ignited the conflict. In response, Saudi Arabia diverted crude through its East-West pipeline, which transports oil to the Red Sea terminal of Yanbu.
From Yanbu, tankers proceeded through the Bab el-Mandeb Strait toward Asia. Similarly, the United Arab Emirates utilized its pipeline traversing neighboring Oman to the port of Fujairah, effectively bypassing the strait.
Both pipelines possessed ample unused capacity, enabling the UAE’s state-owned ADNOC and Saudi Aramco to prevent a total collapse of exports during the critical initial weeks of the war.
Simultaneously, some crude continued to slip past the Strait of Hormuz. By May, ship operators willing to risk Iranian strikes began utilizing a U.S.-supervised route off the coast of Oman, bypassing Iran’s mandated transit system. Operating under the cover of darkness with tracking systems and mobile phones silenced, they conducted covert ship-to-ship transfers outside the strait. Consequently, oil flows from Kuwait, Iraq, and the UAE began to recover.
However, in July, Iranian-backed Houthi rebels in Yemen disrupted the Yanbu alternative by declaring a blockade of Saudi oil shipments, threatening the Bab el-Mandeb strait and risking a repeat of the earlier Hormuz crisis.
In response, Saudi Arabia redirected Asian-bound shipments northwestward to the Mediterranean via the Suez Canal or, for tankers too large for the canal, through an Egyptian pipeline network to other vessels. This resulted in oil making an immense detour, shipping around Africa and back to Asia.
Compounding these challenges, the East-West pipeline was targeted in attacks earlier this month, forcing a complete shutdown that could last for weeks.
With loading operations suspended at Yanbu starting September 11, Saudi Arabia shifted strategy once again, joining other Gulf producers in routing oil through the U.S.-guarded corridor in the Strait of Hormuz. According to shipping data firm Kpler, six supertankers loaded 12 million barrels at Saudi terminals in the Persian Gulf on Monday.
U.S. officials have highlighted the vital role of the southern corridor in maintaining energy flows amidst tightening pressure on Iran. Admiral Brad Cooper, commander of U.S. Central Command, announced in a social media video that American forces facilitated 2,000 commercial vessel transits and the transport of over 1 billion barrels of oil from Gulf partners in recent months.
Analysts estimate that an average of 6 million barrels of oil per day or more are currently passing through the Strait of Hormuz via the covert shuttle route—representing roughly 40% or more of pre-war flow levels.
Rahul Choudhary, Vice President of Upstream Research at Rystad Energy, calculated the figures: with 6 to 7 million barrels daily flowing through the southern corridor and an additional 2 million via the Fujairah pipeline, approximately 8 million of the 15 million barrels blocked daily before the war have been successfully restored.
That still leaves roughly 7 million barrels per day missing from pre-war flow levels.
However, this deficit is offset by other factors: approximately 3.5 million barrels per day are being drawn down from global commercial inventories, while demand has dropped by another 5 million barrels per day due to high prices and sluggish economic growth in key markets. Additionally, non-Gulf suppliers like the U.S. are contributing an extra 500,000 to 700,000 barrels per day, effectively balancing the global oil market.
“Our assessment is that the market is extremely tightly balanced,” Choudhary noted. “This explains why crude prices have not spiked to extraordinary levels, remaining in the $100 range rather than the $140 to $150 territory that would be expected with a deficit of 5 to 6 million barrels.”
Indeed, Rystad Energy projects oil prices to settle between $85 and $90 per barrel in the final quarter of the year, potentially dropping to $80–$82 next year if the Strait of Hormuz is reopened.
These makeshift logistical solutions are both time-consuming and costly.
Routing oil to Asia via the Suez Canal instead of the Red Sea can add up to a month to the voyage. Meanwhile, the Hormuz shuttle trade requires costly tankers to wait at least a day and a half in the Gulf of Oman for ship-to-ship transfers.
The surging demand for supertankers has driven charter rates—normally between $30,000 and $50,000 per day—to astronomical heights. According to maritime data firm Windward, spot charter rates for Hormuz transits peaked at $1 million per day on September 11, equating to roughly $26 per barrel. Consequently, shipping now accounts for a quarter of the total cost, rather than the typical 1% to 3%.
Markets remain highly vigilant against further disruptions. The attack on the East-West pipeline demonstrated the vulnerability of pipeline infrastructure. Iran could attempt to disrupt the U.S.-guarded route through the Strait of Hormuz or target transfer zones near the Omani coast.
If such an event occurs, operators would be forced to conduct transfers even further offshore, increasing transit times and driving up costs exponentially.