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The oil market has messed up Israel’s threat to overthrow the Iranian regime, and so far crude exports from the Middle East have not been affected by the escalating conflict so far.
Financial Times analysis of vessel tracking data shows that there was no significant impact on vessel movement through Hormuz’s important straits. Homayoun Falakshahi, head of crude oil at energy analysis firm Kpler, said their system also showed no decrease in the number of oil tankers passing through the strait.
Approximately 221 million barrels of oil from Iran, Iraq, Kuwait, Saudi Arabia, Qatar and the United Arab Emirates pass every day through narrow waterways separating the Islamic Republic from the Gulf countries, accounting for about a third of the world’s coastal stone supply.
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“The market is relieved by the fact that it saw attacks on energy infrastructure but was constrained by both countries’ domestic energy systems,” Farkshahi said.
International oil benchmark Brent Crude rose by 5.5% early on Monday, rising above $78 per barrel, then gave up those profits to cut 4.1%, just below $71.17. It’s been up less than 4% since the start of last week’s battle.
Over the weekend, Israeli Prime Minister Benjamin Netanyahu said that “it could certainly be a consequence” of Israeli attacks on the Islamic Republic after launching strikes against at least two Iranian gas processing plants and two fuel depots in Tehran. In response, Iran hit the pipelines and power lines serving Israel’s largest refinery.
However, Israel has not targeted Iran’s major oil export terminals on Hague Island, and Tehran is not trying to disrupt transportation through the Strait of Hormuz.
“Israel’s goal is not to rattle the international market, but to make internal logistics even more difficult for Iran,” Farkshahi said.
He added that fewer than usual tankers appeared to be loading oil towards Iran’s Hague Island, as happened after Israel and Iran traded air attacks last October, but this is likely a temporary precaution. One tanker was loaded over the weekend, while the other seemed to slow down their approach to the facility.
Iran currently produces around 3.2 million barrels of oil per day, and exports it almost exclusively exclusively to China.
While the Iranian regime has historically threatened to block the Strait of Hormuz if the country is attacked, traders bet that Tehran is unlikely to try to disrupt shipments, given the need to improve relations with Saudi Arabia and maintain its own exports.
Tehran targeted vessels in the straits during the Iran-Iraq War in the 1980s, and was recently accused of attacks on tankers near the straits in 2019. However, we were unable to block traffic completely. Saudi Arabia restored diplomatic ties with Iran in 2023.
“There are concerns that a wider conflict could close the strategically important Strait of Hormuz, but given that it never happened in history, I think this risk is very low,” the JP Morgan product team wrote in a memo.
The UK Maritime Trade Office said on Monday that the number of large cargo ships passing through the Strait had dropped slightly last week, but added that no information has been identified indicating a lockdown or closure.
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Janiv Shah, an oil analyst with consultant Rystad Energy, said the lockdown would push the market into “unknown territory,” but this was an unlikely result.
Another Iranian response could lead to Tehran trying to attack Saudi Arabia and Iraqi oil fields rather than closing the straits.
In 2019, Iran was widely believed to be behind a drone attack on Saudi Arabia’s largest oil processing facility.
However, Traders bets that such an action, according to Falakshahi, will only serve as a very last resort.
“Currently, actors in the region, especially those currently involved in the conflict, see the benefits of hitting important energy infrastructure,” he said.
Additional Reports by Criskook
